How Long Should You Keep Tax Records UK?

Maintaining accurate tax records in the United Kingdom is fundamental for fulfilling tax obligations and ensuring compliance with His Majesty’s Revenue and Customs (HMRC) requirements. Knowing specific retention periods prevents potential complications or penalties during tax assessments. Understanding these periods is important for both individuals managing personal finances and businesses overseeing their operations, as it streamlines tax processes and provides necessary documentation.

Tax Record Retention for Individuals

Individuals subject to Pay As You Earn (PAYE) deductions, where their employer handles most tax calculations, should keep payslips, P60 forms (End of Year Certificate), and P45 forms (Statement of Employment and Pay) for at least one year after the relevant tax year ends. These documents provide proof of income and tax paid, useful for financial purposes or discrepancies. Longer retention is advisable for complex financial arrangements or anticipated tax inquiries.

Self-Assessment taxpayers, including sole traders or those with significant untaxed income, must retain all relevant documents for five years after the 31 January submission deadline for the tax year. These records include income statements, invoices, business expense receipts, and bank statements.

Individuals receiving rental income must maintain records of all rental income and deductible expenses, including rent receipts, utility bills, maintenance invoices, and mortgage interest statements. These records fall under the Self-Assessment retention rules, requiring them to be kept for five years after the submission deadline. For capital gains (e.g., from selling shares or property), records of purchase costs, sale proceeds, and associated expenses must be preserved to accurately calculate any taxable gain or allowable loss.

Tax Record Retention for Businesses

Sole traders and partnerships must keep essential records, including sales invoices, purchase invoices, bank statements, expense receipts, and payroll records if they employ staff. These records support the figures reported on their Self-Assessment tax returns.

Limited companies in the UK have distinct record retention obligations, primarily governed by company law and tax regulations. Companies must keep their accounting records for six years from the end of the accounting period. This includes company accounts, bank statements, sales and purchase invoices, and records of any assets and liabilities. Maintaining these records accurately ensures the company can justify its Corporation Tax returns and other financial filings.

Businesses registered for Value Added Tax (VAT) must adhere to specific rules for VAT record retention. All VAT records, including account details, sales and purchase invoices, and import/export documents, must be kept for six years. This applies even if the business deregisters. Employers (sole traders, partnerships, or limited companies) also have specific requirements for Pay As You Earn (PAYE) records. Payroll records, including employee earnings, deductions, and P11D forms, must be kept for three years from the end of the tax year.

Situations Requiring Longer Retention

Individuals or businesses may need to retain tax records beyond standard periods. If HMRC initiates an investigation, all related records must be kept until the inquiry is formally concluded, even if it takes several years. Failure to produce requested documents can lead to HMRC assumptions, potentially resulting in higher tax assessments or penalties.

For property sales involving Capital Gains Tax, records supporting the acquisition and any improvements to the property should be kept for an extended duration. These documents, such as purchase contracts, invoices for renovations, and legal fees, are necessary to calculate the cost basis of the asset. They may be required many years after the initial purchase, especially if the property is held for an extended period before being sold.

Businesses or individuals carrying forward losses to offset future profits must maintain records supporting these losses. Documentation must be preserved until losses are fully utilized and relevant tax years are officially closed by HMRC, ensuring claims can be substantiated. Similarly, those with complex tax affairs, long-term investments, or ongoing tax planning should retain all related records for an extended period.