Record Keeping: A Complete UK Guide

Keeping accurate tax records is a legal requirement in the UK. HMRC requires you to maintain records of your income, expenses, and other tax-relevant information for specified periods. Failure to keep adequate records can result in penalties and make it difficult to defend yourself in the event of a compliance check. With the rollout of Making Tax Digital (MTD), digital record keeping is now compulsory for VAT and is being extended to income tax.

The Legal Requirements

Under UK law, you must keep records that enable you to make a complete and accurate tax return. The specific requirements depend on your tax status. Self-employed individuals and landlords must keep records of all income and expenses, including sales, receipts, purchases, and payments. Companies must maintain statutory accounting records under the Companies Act 2006, in addition to tax records.

The records must be sufficient to allow HMRC to verify that your return is correct. This means you should keep original documents such as invoices, receipts, bank statements, credit card statements, and payroll records. HMRC does not require you to keep records in any particular format, but they must be legible and accessible.

The 5 Years / 22 Months Rules

The time periods for keeping records are:

• Self-employed individuals and landlords: keep records for 5 years from 31 January following the end of the tax year. For example, records for the 2025/26 tax year must be kept until at least 31 January 2032.
• Limited companies: keep records for 6 years from the end of the accounting period, or longer if the company is subject to a longer period under Companies Act requirements.
• VAT-registered businesses: keep records for 6 years from the end of the VAT accounting period, unless HMRC agrees otherwise.
• PAYE records: keep records for 3 years from the end of the tax year to which they relate.

These periods can be extended if HMRC opens an enquiry into your return. You must retain all relevant records until the enquiry is closed, even if that takes longer than the standard retention period.

What Records to Keep

For self-employed individuals and landlords, the key records are:

• Income records: invoices issued, sales receipts, bank deposits, till rolls, and any other evidence of income received
• Expense records: purchase invoices, receipts, credit card statements, and proof of payment for all business expenses
• Bank and credit card statements: showing all business transactions
• Mileage records: a log of business journeys, including dates, destinations, purpose, and mileage
• Capital asset records: details of assets bought and sold, including purchase and sale dates, costs, and proceeds
• VAT records: VAT invoices, VAT accounts, and VAT returns
• Payroll records: employee details, wages, deductions, and RTI submissions

For investments, keep dividend vouchers, contract notes for share sales, and annual statements from investment platforms. For property, keep estate agent statements, solicitor completion statements, and records of capital improvements.

Digital Records for MTD

Making Tax Digital (MTD) requires VAT-registered businesses to keep digital records and file VAT returns using compatible software. From April 2026, MTD for income tax (MTD ITSA) will require self-employed individuals and landlords with income over £50,000 to keep digital records and submit quarterly updates to HMRC. This will be extended to those with income over £30,000 from April 2027.

Digital records must be kept in a software package or spreadsheet that can exchange data with HMRC's systems. The software must be capable of receiving and storing data digitally, and of submitting information to HMRC electronically. HMRC maintains a list of compatible software products.

Penalties for Poor Records

If you fail to keep adequate records, HMRC can charge a penalty of up to £3,000 per tax year for each failure (under Schedule 24 Finance Act 2007 for income tax and corporation tax). For VAT, the penalty for poor records can be up to 15% of the VAT due, plus a daily penalty of up to £60 for continued non-compliance.

More commonly, poor records result in HMRC being unable to verify the figures in your return. In that case, HMRC may use its best judgment to estimate your tax liability, which is almost always higher than what you would have paid with proper records. If you cannot substantiate deductions or expenses claimed, HMRC will disallow them.

Practical Tips

Set up a bookkeeping system that works for your business, whether it is a spreadsheet, a cloud accounting package, or a paper-based system. Record transactions regularly rather than leaving them until the tax return deadline. Keep your business and personal finances separate by using dedicated business bank accounts and credit cards. Back up your digital records regularly and store physical records in a safe, dry location.

If you use an accountant, agree with them what records you need to provide and in what format. Many accountants offer bookkeeping support services that can help you stay on top of your record keeping throughout the year.

Browse more UK tax compliance and disputes guides or try our calculators.