If you’re a self-employed individual, you may find that you are spending a lot of time creating records of your actions and transactions – may, in fact, discover that those record-keeping practices are often labourious and that it’s harder than you think. If that’s the case, it may be that you haven’t found an efficient system yet. Or you may be recording the wrong things, creating the wrong paperwork, or storing documents that you don’t need to. After all, there’s no point doing all those administrative tasks if the records you keep don’t help you in the future. Here’s your important guide to the records you should keep if you are a self-employed individual.
What you should keep
The basic documents that you should keep are those that prove your expenses and your income. These include:
- All receipts and invoices
- All business expenses
- Records of personal income
You should also keep taxation-related and employment-related documents, such as:
- VAT records
- PAYE records if you employ people
These records are, of course, mandatory – but they’re also useful. To have good accounting practices, you should also record:
- What you’re owed but haven’t received yet
- What you should pay but haven’t yet (received but as-of-yet unpaid invoices)
- The value of your stock
- All bank statements
- Investments and withdrawals in and from the business
Why you keep it
It seems like a straightforward answer: because you have to. Fair enough, that’s one reason: you should be able to show them to HM Revenue and Customs (HMRC) whenever you’re asked.
However, keeping those records (especially in different formats and on spreadsheets) will help you with sound accounting practices, as confirmed by accountants in central London like those from GSM & Co., and help you not only manage your expenses and income, but also project it into the future – and this can lead to better planning and optimising of profits. Understanding where your income comes from (and how frequent), as well as where your expenses go (and when) will help you find ways to create more income and fewer expenses. It’s about profit, after all. It’s about helping yourself succeed.
Keeping these records is not important for the entrepreneur or self-employed person to get insight into the business or profession, it’s also mandatory by law. For example, the records specified above should be kept for at least five years after the deadline of submission of the relevant tax year. For example, records kept during the year 2015 and 2016 must be kept until 2022 – because the deadline of tax returns is January 31, 2017. This is also just to make sure you don’t get in trouble as well. And besides, it’s always good to have those records, anyway. You can learn from them. You can learn a lot.