What Records Should Small Businesses in Manchester Keep for Tax Purposes?

Although managing a small business in Manchester is exciting, the administrative side of things, particularly tax record-keeping, can easily become too much to handle. However, keeping precise and well-organized financial records is not only a good idea; HMRC has made it a legal requirement. Knowing what to keep, how long to keep it, and why it matters can help you avoid penalties, stress, and financial loss whether you're a limited company or a sole proprietor.

What should you keep, then, and how can Manchester accountants assist?

 Essential Records You Must Keep

1. Records of Sales and Income
You should keep a record of every payment you receive. Save bank statements, receipts, and sales invoices. Save and backup the daily, weekly, and monthly summaries if you're using a point-of-sale system.

2. Purchase and Expense Documents
Keep track of all business expense bills, receipts, and invoices, including those for travel and office supplies. Digital receipts for advertising expenditures and software subscriptions should not be overlooked.

3. Payroll Records (if applicable)
If you employ staff, payroll records including payslips, pension contributions, and PAYE submissions must be stored securely and accurately.

4. VAT Documents
VAT invoices, returns, and any correspondence with HMRC must be kept on file if your company is registered for VAT. Many records must also be maintained digitally in accordance with MTD (Making Tax Digital) regulations.

5. Bank Statements and Loan Agreements
These show the movement of money in and out of your business and are often required during HMRC inspections or funding applications.

6. Asset and Depreciation Records
If you've purchased equipment or vehicles for your business, keep details like the invoice, depreciation schedules, and disposal dates.

For what length of time must you maintain these records?

Records must be maintained for a minimum of six years for the majority of small businesses. You may occasionally be asked to produce records that are older than that, particularly if you file late or are the subject of an investigation.

Why Is This Important?

• Tax Accuracy – Poor records can lead to errors in tax returns, costing you money.
• Audit Protection – If HMRC investigates, you'll need to produce records fast.
• Cash Flow Visibility – Good record-keeping helps you understand your business performance and make better financial decisions.

Instruments That Facilitate It

Xero and QuickBooks are two examples of cloud accounting platforms that can assist you with digital record keeping, expense classification, and instant report generation. Above all, they support HMRC's Making Tax Digital mandate.

Do You Need Help with Record-Keeping?

If you're unsure whether you're storing the right records or want to switch from paper to digital, it's time to speak to a professional. The team at YRF Accountants in Manchester can:

• Set up your record-keeping system
• Offer bookkeeping support
• Ensure your accounts are fully HMRC-compliant