Once your self-assessment tax return is filed, it might feel like you can finally take a breath, so you’re probably not thinking about what comes next? The ‘big job’ might be done but there’s still one more important task to action – The invoices, receipts and bank statements you gathered for calculating your tax return need to be carefully stored.
There’s a number of important reasons why you need a great storage system in place, including:
- Referencing for the next tax year
- Auditing by HMRC
- Needing to make amendments
- Staying on top of your business’s financial health.
Legally, business owners have guidelines they must follow as outlined by HMRC including, “You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.” This is to make sure you’re paying the correct amount of tax and you can be audited at any time, so you need to be audit ready.
In this post, we’ll walk you through the key documents you should keep, why they matter for tax compliance and how going digital can make your life a lot easier, when it comes to organising and storing everything you need.
What do we mean by being audit ready?
Most small business owners don’t think about audits but HMRC might request documents to verify your tax filings or to check compliance with tax laws. Having all your financial documents well-organised means you’ll be prepared if and when you’re asked to provide proof of your income, expenses or deductions.
Going digital makes you’re audit-ready by allowing you to keep all your records in one place, making them accessible at a moment’s notice. It’s much easier to pull up a digital document than it is to wade through stacks of paper or hunt through hard copies in a file.
If you’re unsure of exactly which documents you should keep, we recommend speaking to a qualified professional, such as you’re accountant. Here are some of the main financial documents you should consider, some are required by HMRC to be kept for your records and others we suggest as good practice. For each document, we’ve also highlighted why should you consider going digital (if you haven’t already)?
1. INVOICES
Your invoices are an essential part of your business records because they provide a detailed account of your sales, showing exactly what you’ve sold and to which customers. Invoices are the main evidence for your income and having them on hand is crucial, when it’s time to file your tax return or to provide evidence for an audit.
Why Going Digital Helps: Keeping your invoices digitally can save you time and hassle not just in the future but also right now! You can easily access them whenever you need them and you won’t have to worry about losing paper copies. Plus, digital invoices are easy to organise, allowing you to track payments and stay on top of any outstanding money you’re owed. Going digital with an online invoice generator like Invoicenet, makes it easier to find your past invoices when you need them but also to create, send and track your current invoices – boosting your cash flow.
2. RECEIPTS FOR BUSINESS EXPENSES
From office supplies to essential materials or services, receipts prove the business expenses you’re claiming on your taxes. Often documented on small pieces of paper, they’re easy to lose but can quickly add up to a significant amount of money and you’ll need to keep them as evidence of any deductions you’re claiming. Without them, you could end up paying more tax than your should or worse, face penalties for incorrect filings.
Why Going Digital Helps: Storing receipts digitally eliminates the risk of losing them. One quick tip can be to take photos or scans of receipts, as soon as you get them and store them in a digital folder. Using tags or names that include the item, date and amount can help make them searchable in the future. This way, they’re safe, quick to find and easily accessible when you need to back up your claims. Going digital means no more digging through drawers or hunting through hard copies in a file to find that one receipt you swear you kept! Some digital applications, such as, Invoicenet can also help you track your expenses saving you time when you need to submit your return.
3. BANK STATEMENTS
Your business bank statements give you a clear picture of your cash flow. They show every transaction you’ve made, from payments you’ve received to bills you’ve paid. Bank statements are essential for verifying your income and expenses and HMRC may request these during an audit.
Why Going Digital Helps: Many banks offer digital statements, which can be automatically downloaded and stored on your computer – some even provide ‘certified’ copies. You can link these statements with your invoices and receipts, creating a complete record of your business’s financial activity. If your bank doesn’t provide this service, you can scan or photograph the paper copies as an alternative. Going digital makes it easier to spot discrepancies, track your financial progress and stay organised without clutter. It also means you have a backup of your bank statements if a fire, flood or other unexpected ‘act of God’ damages your paper records.
4. TAX RETURNS FROM PREVIOUS YEARS
It’s always a good idea to keep copies of your past tax returns. They help you keep track of your business’s financial history and can serve as a reference if you ever need to make amendments. At the very least, keeping a digital copy of your submission confirmation is evidence that you submitted your return on time.
Why Going Digital Helps: Keeping digital copies of past tax returns means they’re always at your fingertips. Whether you need to refer back to them during the year or when preparing for next year’s tax return, digital records are easy to access and won’t get lost in a pile of paperwork. Plus, they’re easy to back up, ensuring you don’t lose any important historical data. Having your own digital copy of your tax return also covers you if HMRC raise any questions about your returns or you lose access to your online HRMC account.
5. PAYROLL RECORDS (IF APPLICABLE)
If you have employees, maintaining payroll records is essential. This includes payslips, tax deductions and contributions to things like pensions or insurance. Payroll records prove that you’re meeting your legal obligations with regard to PAYE and other employment-related taxes.
Why Going Digital Helps: Digital payroll systems allow you to track everything from hours worked to tax deductions in real-time. You can quickly generate payslips and store them securely, making your payroll process more efficient. Going digital ensures that everything is neatly organised and ready to be submitted if HMRC raises a query or a member of staff has a question.
6. CONTRACTS AND AGREEMENTS
Whether you’re dealing with clients or suppliers, keeping a record of contracts and agreements is essential. These documents protect both you and the other person or business and provide a foundation for any transactions or when navigating a dispute. They also help confirm income and outgoings, which are necessary when filing your tax return.
Why Going Digital Helps: Creating and storing contracts and agreements digitally means you can create duplicate copies that can be easily and quickly shared or accessed when needed. There’s many applications that specialise in creating contracts but even if you choose to simply use a word processor to create a PDF version, it means you can organise your digital filing system in a way that works best for you.
Allocating dates, contacts or projects numbers as file names, or adding unique tags (if your system allows) makes your documents searchable. Going digital keeps everything in one place, reduces the risk of misplaced or forgotten documents and helps you quickly resolve any potential disputes, while creating a professional image that builds confidence for your customers and suppliers.
THE BOTTOM LINE
As a small business owner, staying on top of your financial documents is just as important after filing your tax return, as it is during your tax return. By keeping everything organised and accessible, you’re not only making your work life easier but also future-proofing your business against any queries or disputes from HMRC, customers, suppliers or even staff.
Going digital simplifies the whole process, making your records easy to manage, secure and ready for whatever comes next. If you’re still not convinced about going digital, here’s a quick recap of some of the benefits:
- Instant Access – Digital documents can be accessed from anywhere, at any time. Whether you’re in the office, at home, or on the go, you can easily retrieve what you need within seconds. This convenience helps save time and eliminates the need to dig through physical files or binders.
- Better Organisation – Digital storage systems make it easier to organise documents by categories, keywords or dates. No more sorting through piles of paper or worrying about misplacing important files. With the right system, everything can be neatly organised and easily searchable.
- Increased Security – Digital documents can be protected with passwords, encryption and secure cloud storage. This reduces the risk of theft, loss, or damage from fire or natural disasters. Depending on the system you use, you can also track access to ensure only authorised individuals are viewing sensitive information.
Save Money – Going digital helps reduce costs associated with paper, ink, filing cabinets and office space. Storing documents digitally means you don’t need to maintain large amounts of physical storage, saving both time and money in the long run.
