How Long Must a Limited Company Keep Bookkeeping Records for HMRC?
HMRC requires limited companies to keep their bookkeeping records for at least 6 years from the end of the accounting period they relate to. This is set out in the Companies Act 2006 and the Taxes Management Act 1970. It is not optional. It is a legal requirement that applies to every limited company, regardless of size or turnover.
The 6 year clock starts from the end of the company's accounting period. So for a company with a year end of 31 March 2025, you must keep all records until at least 31 March 2031. If HMRC opens an enquiry into a return, they can ask for records going back further. The 6 year rule is the minimum. In practice, many accountants advise keeping records for 7 years to be safe.
As ICAEW qualified accountants, we see directors get caught out when they close a company or stop trading and throw everything away. That is a mistake. The 6 year retention period still applies even after the company has been dissolved. You are personally liable as a former director if records are missing when HMRC comes asking.
What Records Must You Keep?
HMRC expects you to keep enough information to allow them to check that your company has paid the right amount of tax. That means you need to retain everything that supports the figures on your corporation tax return (CT600) and your VAT returns.
Financial Statements and Accounting Records
You must keep the statutory accounts you file at Companies House. That includes the profit and loss account, balance sheet, directors' report, and any notes to the accounts. You also need to keep your trial balance, nominal ledger, sales ledger, and purchase ledger. These are the building blocks that support the final accounts.
Bank Statements and Cash Books
Every bank statement for every business bank account must be kept. If you use a cash book or a digital accounting system like Xero or FreeAgent that reconciles transactions automatically, you still need the underlying bank statements. HMRC can ask to see them. Do not rely solely on your software export. Keep the original PDF statements from the bank.
Sales and Purchase Invoices
You must keep all sales invoices you issue and all purchase invoices you receive. This includes credit notes, debit notes, and any adjustments. The invoices must show the correct VAT treatment if you are VAT registered. For sales invoices, you need the customer name, date, amount, and VAT rate. For purchase invoices, you need the supplier name, date, amount, and evidence that the expense was wholly and exclusively for business purposes.
Payroll Records
If you employ anyone including yourself as a director, you must keep payroll records. This includes the P32 (employer payment summary), P60 (year end summary for each employee), P45 (leaver forms), P11D (benefits in kind), and P11D(b) (Class 1A National Insurance). You also need to keep RTI (Real Time Information) submissions and any correspondence with HMRC about PAYE.
VAT Records
If your company is VAT registered, you must keep VAT account records. This includes your VAT return submissions, VAT1 (registration) or VAT484 (change of details) forms, and any correspondence with HMRC about VAT. You also need to keep the underlying sales and purchase invoices that support each VAT return.
Director's Loan Account Records
If your company has a director's loan account, you must keep records of every transaction. This includes money you put into the company (capital introduced), money you take out (drawings or dividends), and any loans made to or from the company. The director's loan account is a common area where HMRC focuses attention. Missing records here can lead to S455 tax charges at 33.75% on loans not repaid within 9 months and 1 day of the year end.
Capital Asset Records
You must keep records of any capital assets the company buys or sells. This includes plant and machinery, vehicles, computers, furniture, and any property. You need the purchase invoice, the date of purchase, the cost, and any capital allowances claimed. When you sell the asset, you need the sale invoice and the date of sale. These records support the capital allowances and chargeable gains calculations on the CT600.
Corporation Tax Records
You must keep the CT600 return itself, plus any supporting computations. This includes the tax computation that shows how the profit per the accounts is adjusted to arrive at the taxable profit. You also need to keep any correspondence with HMRC about the return, including any enquiry letters or closure notices.
What Format Should Records Be Kept In?
HMRC accepts records in paper or digital format. Most companies now keep records digitally using accounting software like Xero, QuickBooks, FreeAgent, or Sage. That is fine. But you must be able to produce the records in a readable format if HMRC asks. A digital export in CSV or PDF format is acceptable. Paper records are also acceptable, but you must store them securely and be able to find them quickly.
If you use cloud accounting software, the records are stored on the provider's servers. That is fine as long as you can access them. But be aware that if you stop paying for the software, you may lose access. Download a full export of your data at least once a year and store it securely. We recommend keeping a backup on an external hard drive or in a secure cloud storage service like Google Drive or Dropbox.
What Happens If You Don't Keep Records?
HMRC can impose penalties for failing to keep adequate records. The penalty is up to £3,000 per offence. If HMRC opens an enquiry and you cannot produce the records, they can estimate the tax due and charge you that amount. They will not be generous with their estimates. You could end up paying far more tax than you actually owe.
There is also the risk of criminal prosecution in serious cases. That is rare, but it happens. In 2023, HMRC prosecuted several directors for failing to keep records and filing false returns. The penalties included prison sentences. Do not take the risk.
When Can You Destroy Records?
You can destroy records once the 6 year retention period has expired. But be careful. If HMRC has opened an enquiry into a return, you must keep the records until the enquiry is closed, even if that takes longer than 6 years. If you have filed a late return, the 6 year clock starts from the date you actually filed the return, not the original due date.
If you are unsure whether you can destroy a particular set of records, keep them. The cost of storing a few boxes of paperwork or a few gigabytes of digital files is negligible compared to the cost of a penalty or an HMRC assessment.
How Holloway Davies Can Help
We handle bookkeeping and compliance for limited companies across every sector. From a 4 employee software consultancy in Manchester turning over £420,000 to a husband and wife Ltd company running a Birmingham café, we make sure the records are right and the deadlines are met. We use Xero and FreeAgent for cloud bookkeeping, and we keep full digital copies of everything.
If you are not sure whether your records are complete, or if you have an HMRC enquiry coming in, get in touch. We can review your records, identify gaps, and help you get compliant. The cost of a compliance review is far less than the cost of a penalty.
Visit our services page to see how we work with limited companies, or contact us directly to book a free initial consultation.
Final Word on the 6 Year Rule
The 6 year rule for bookkeeping records is straightforward. Keep everything for 6 years from the end of the accounting period. Keep it in a format you can access. Keep it even after the company stops trading. Do not destroy anything until the 6 years are up and no enquiry is open.
If you follow that rule, you will never have a problem with HMRC over missing records. If you ignore it, you are gambling with your company's money and your personal liability as a director. That is not a gamble worth taking.
For more on bookkeeping and compliance, read our other posts on limited company tax and corporation tax. And if you are just starting out, our fundamentals guide covers everything a new director needs to know.