One of the less glamorous elements of working as a contractor is your tax return. Every self-employed worker in the UK has to submit their return each year, and 31st January 2018 is the deadline for the 2016/17 tax year.
If you read this before that date and need to do your tax return pronto. We’ll let you off for not reading the rest of this article as you scarper off to get it sorted... Be better organised next year!
But if you are a contractor who has already submitted their return for this financial year, there’s a chance you may have questions around the information you’ve put together for HMRC, and in particular how long to keep these records for.
HMRC says on its website that those submitting self-assessments must keep their records for at least five years from the 31st January deadline.
So for example, if you sent your 2013/14 tax returns by 31st January 2015, you should keep your records until at least January 2020.
The question then raised is exactly what these records should show. Now, if you’ve just completed this process, then you’ll probably know this information inside out. But if you’re tempted by contracting but think things like this may be a downside, take a look.
As a personal service company director, you should keep a record of:
- All sales and income
- All business expenses
- VAT records if you’re registered for VAT
- Records about your personal income
What needs submitting?
One thing worth clarifying is that you don’t need to send these records to HMRC when submitting your tax return. But there are a couple of reasons why you need to keep them.
These include working out profit or loss for your current and future tax returns. HMRC can also request to see your business records, and it’s vital therefore that you have accurate details available if such a request comes your way.
HMRC also advises you to keep proof of all receipts, bank statements, invoices and bank slips relevant to your company.
Other things to keep as part of your business records include information on anything you’re owed but haven’t yet received (i.e. outstanding pay), year-end bank balances, how much you’ve invested in the company that year, and how much you’ve taken out for your own use.
If you're still completely unsure, last year we highlighted what not to forget when submitting your tax return. HMRC are likely to pick up on anything they believe to be erroneous or suspicious, so to ensure you avoid an unnecessary headache, make sure you stay on top of your business records and on top of your business!
For further information about tax returns visit the Gov.uk website by clicking here