How long do you need to keep business financial records?Filing cabinet

Ever wondered about the optimal duration to retain those crucial financial records? Well, according to HMRC regulations, businesses are advised to keep their financial records for a span of 6 years post the accounting year end.

However, the importance of holding onto your receipts goes beyond mere compliance – it could potentially unlock tax-saving opportunities!

Let’s uncover some of the benefits of maintaining your financial paperwork.


Pre-VAT registration expenses claim

If you started trading before you were registered for VAT, you can generally claim input VAT suffered on expenses that were incurred during the normal course of trading. These include services that you bought and used for the business up to 6 months before the date of registration and goods that are still in use that were brought up to 4 years before the date of registration.

For example, if you pay for accounting software monthly, you can claim the input VAT for the last 6 months of payments.


Pre-trading expenses claim

When you set up a new business, whether as self-employed or a limited company, you can claim relief for business related expenses that were incurred within seven years before you started trading. These expenses will be treated as if they were incurred on the first day of trading and therefore reduce your taxable income.

Examples of pre-trading expenses include website and advertising costs, staff recruitment costs and legal and accounting fees.


Property trade

Renting out UK properties is a trading business for tax purposes, so the pre-trading expenses rule will also apply. The date you start trading is the date your first property is let out. Any expenses, for example council tax, letting agents, building and contents insurance, that were incurred before this date can be deducted from the total rent received.

Before letting out, you may incur repairs costs, and these can be treated as pre-trading costs if they are viewed as revenue expenditure. It is best to speak to your accountant to determine if the repairs costs are classed as revenue expenditure or capital expenditure.

The pre-trading rule applies only to properties that were purchased solely for rent. If you rent out your primary residence, no relief can be claimed.


If you’d like more guidance on why it’s important to keep good financial records and for how long, you can get in touch with our accounts team by filling out our contact us form.