What Tax Records Should I Keep

Published / Last Updated on 17/05/2021

What Tax Records Should I Keep

HMRC is being increasingly asked to collect more tax revenue accurately.  They have recruited an additional 2,000 inspectors and investigations are on the up.  This article explains the dates and what information you should keep, just in case you receive a notice to complete a                    self-assessment, as many people only find out after the end of the tax year that they are now required to submit tax returns.

The UK fiscal year is April 6th - April 5th in the following year.  

We are then required to file self-assessment tax returns by the following January 31st.  This is nearly 10 months after the tax year end and some 22 months from the start of the tax year being assessed.  The fact remains that we are given more than a reasonable amount of time to maintain our income and capital gains records or seek professional help to enable us to file self-assessment returns within the required deadline.

It is therefore no surprise that HMRC fine us if we are late.  If you were an employee and you had to wait for 10 months before you got paid, you would take legal advice very quickly and probably seek alternative employment.  If you were self-employed and your client owed you money and did not pay you after 10 months and then still ignored your repeated requests for payment thereafter, you would likely not tolerate it and go to the small claims court and levy late payment penalties yourself.  It is therefore reasonable for HMRC to treat you how you would treat your clients or employer.

HMRC does not use a carrot to entice you to file self-assessment returns, they use a very large stick.  If you ignore notices when HMRC make repeated requests for submission, then clearly their system of repeated and escalated fines is warranted.  After all, by ignoring their request you are creating more work for them.  Is it wishful thinking that your fines will not escalate.  

If you are in difficulty, then the advice is to not “do not put your head in the sand”.  The problem will not go away.  HMRC’s position is clear.  They repeatedly say “the facts are the facts”.  If you have taxable income or gains then tax is due.  If you are late paying it, you incur penalties.  This may seem unfair, given that we have seen high profile multi-national firms negotiate their fines down, so clearly HMRC will negotiate on penalties but this is perhaps a question of economies of scale, additional resources required or indeed a commercial decision by HMRC with regard to legal fees needed to fight a case through the Courts.  For the average person, HMRC will simply not waive the penalties.  If they do it for one person, they will be forced to do it for all, which they cannot afford to do.  

Therefore, you must approach tax on the basis that any late submission fine will likely not be waived unless over-riding circumstances prevail.  We must all keep records.

Knowing Whether To Keep Records or Not:

The problem: HMRC does not notify you of the need to submit a tax return until after the end of the tax year.  
For example, you may have been a basic rate tax payer and then receive a promotion at work and cross-over to become a higher rate tax payer part way through the tax year.  You may not have bothered to keep records through the year and then find yourself needing those records as HMRC flag your tax record as one that needs to file a return.

General Record Keeping Advice

This is not just for the self-employed, but for all.  It also make sound personal financial planning sense.

Disciplined record keeping.  Do your book-keeping, be it personal or trade, at least every week or month and reconcile your bank account at least once a month.
Ideally, talk to your bankers about online account access, much of your income, expenses and interest received will be readily available with historic bank statements.

Talk to HMRC about online self-assessment registration.  It is better to have your access code and passwords as soon as you receive a notice to file a return rather than leaving it ten months and trying to secure online access just a few days before the 31 January deadline.  Log in online to your self-assessment pages and get used to HMRC’s system.  Explore and learn what information will be needed.
If you are unsure, we can register you for self-assessment if needed.  Contact us.

Keep all records.  Ideally, purchase a scanner and scan everything to a folder on your pc.  At least you then have a permanent record that is ‘date-stamped’ and you can also back up your records.
If you are not confident on a computer, keep all receipts, statements, payslips.  Even if you keep them in an old shoe box and go through them at the end of the month.

  • Mortgage Statements
  • Bank Statements
  • Payslips
  • Dividend Slips
  • Expenses
  • Keep Everything

If in doubt, use a professional: talk to a financial adviser, accountant, book keeper or tax professional about what information to keep or record.

If you move home, it is no defence that you were not aware that you need to file a return as your post was delivered to an old address.  Tell HMRC that you have moved as soon as possible and ask them if they have written to you since your moving date.

Peace of mind: By keeping regular records, you have taken control of your finances.  Self-assessment need never be a fear again.

Help with late filing fines.
As mentioned above, this is not a time for ‘heads in the sand’.  Once HMRC has issued a notice to file a return or a late penalty, they usually cannot cancel or withdraw the request and with any penalties, they are very difficult to have them removed.  You must act quickly.  Telephone HMRC’s self-assessment helpline today, if they know you are working on the problem or the real reason for a late return, they may postpone further penalties.  If in doubt, get professional help and advice, contact us.

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