HMRC expects you to keep proper records of all business transactions. At Brightson Accounting, we help businesses across Wolverhampton and the West Midlands maintain compliant record-keeping systems.

Poor record keeping leads to:

  • HMRC penalties (if you can't prove your figures)
  • Overpaying tax (missing allowable expenses)
  • Stress during tax return season
  • Disallowed expense claims (no receipt = no claim)
Quick Summary
  • Keep records for 5 years (Self Assessment) or 6 years (Corporation Tax, VAT)
  • Must be accurate, complete, and readable
  • Digital records becoming mandatory (Making Tax Digital)
  • Include: invoices, receipts, bank statements, payroll records

What Records Must You Keep?

For All Businesses:

Sales Records:

  • All sales invoices
  • Sales receipts and till rolls
  • Bank deposit slips
  • Online payment confirmations

Purchase Records:

  • All supplier invoices
  • Receipts for expenses
  • Credit card statements (business account)
  • Petty cash records

Banking Records:

  • Business bank statements
  • Paying-in books
  • Cheque stubs
  • Online banking transaction history

If You Have Employees:

  • Payroll records (salaries, deductions, PAYE)
  • P60s issued to employees
  • P11D forms (benefits in kind)
  • Expense claim records
  • Employment contracts

If You're VAT Registered:

  • VAT invoices (issued and received)
  • VAT account showing VAT charged and reclaimed
  • Copies of VAT returns
  • Import/export documentation

Full guide: VAT Compliance: Common Mistakes

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How Long to Keep Records

Tax TypeKeep For
Self Assessment5 years from 31 January filing deadline
Corporation Tax6 years from end of accounting period
VAT6 years (or longer if HMRC requests)
PAYE3 years from end of tax year

Example (Self Assessment):

Tax year 2025/26, filed 31 January 2027 → Keep records until 31 January 2032.

When in doubt, keep records for 6 years. This covers most scenarios and protects you if HMRC enquires.

Digital vs Paper Records

Paper Records

Acceptable, but:

  • Risk of loss (fire, flood, damage)
  • Harder to search and organize
  • Takes up physical space
  • Not compatible with Making Tax Digital

Digital Records (Recommended)

Benefits:

  • Searchable and organized
  • Backed up (cloud storage prevents loss)
  • Required for Making Tax Digital (MTD)
  • Easier to share with accountant
  • Less storage space needed

How to Digitize:

  • Photo receipts with your phone (apps like Dext, Receipt Bank)
  • Scan paper documents to PDF
  • Store in cloud (Dropbox, Google Drive, OneDrive)
  • Use accounting software that stores records automatically

Full guide: Making Tax Digital: What You Must Do

What Makes a Valid Invoice?

For HMRC to accept an expense claim, your invoice/receipt must include:

  • Supplier name and address
  • Date of purchase
  • Description of goods/services
  • Amount paid
  • VAT amount (if VAT registered)
  • VAT number (if claiming VAT back)

Not valid:

  • Credit card statements alone (not detailed enough)
  • Handwritten notes without supporting receipt
  • Till receipts that have faded (photo them immediately!)

Common Record-Keeping Mistakes

Mistake 1: Not Keeping Receipts

"I forgot to get a receipt" = HMRC will disallow the expense claim. Always get a receipt, even for small purchases.

Mistake 2: Losing Digital Records

Storing everything on one computer with no backup = risk of losing everything. Use cloud storage with automatic backups.

Mistake 3: Mixing Personal and Business

Keeping personal and business records together makes it impossible to prove business-only expenses. Separate from day one.

Mistake 4: Throwing Away Records Too Early

Many West Midlands businesses we see throw away records after 1-2 years. HMRC can enquire up to 6 years back — keep everything.

Full guide: Bookkeeping Basics for Compliance

What Happens If You Don't Keep Records?

If HMRC enquires and you can't provide records:

  • HMRC will estimate your income (usually higher than reality)
  • They will disallow expense claims (no proof = no claim)
  • You'll pay more tax than you owe
  • Penalties apply for inadequate records (up to £3,000 per tax year)

Best Practices for Record Keeping

✅ Record Keeping Checklist
  • Keep all receipts and invoices (digital or paper)
  • Photo receipts immediately (before they fade)
  • Use accounting software to organize records
  • Back up digital records to cloud storage
  • Separate business and personal records
  • Keep records for 6 years minimum
  • Review records quarterly (catch errors early)

How Brightson Accounting Can Help

We help businesses across Wolverhampton and the West Midlands with:

  • Setting up digital record-keeping systems
  • Recommending best accounting software for your business
  • Training you to maintain compliant records
  • Organizing existing records (we can clean up the mess!)
  • Handling HMRC enquiries (if records are questioned)

Good record keeping = easy tax returns and full expense claims. Want to stay compliant and reduce your corporation tax? Speak to an accountant today.