How long should you keep your business records?

How long you keep business records depends on the record, the tax authority you answer to, and the type of business you run. The safe rule is to keep each record for the full period the rules require, and to hold anything that supports long lived assets or payroll a little longer.

Why retention periods exist

Tax authorities can ask you to prove what you reported. In the United States the responsibility to substantiate income, deductions and statements on a return is known as the burden of proof, and it sits with the business. Where records have been lost or destroyed, the fallback is to provide the best figures you can and to say so when you file.

You may choose any recordkeeping system that suits your business, as long as it clearly shows income and expenses.

United Kingdom: companies and sole traders

A limited company must keep accounting records for six years from the end of the last financial year they relate to, and for longer if a transaction spans more than one accounting period, if the company bought an asset expected to last more than six years, if a Company Tax Return was filed late, or if a compliance check has started. Failing to keep accounting records can lead to a fine or to a director being disqualified.

A sole trader has a different clock: records must be kept for at least five years after the 31 January submission deadline of the relevant tax year. A return filed very late carries its own rule, so check the current guidance rather than copying an old filing system. Both rules are set out on gov.uk.

United States: the federal baseline

The Internal Revenue Service asks that records be kept as long as they are needed to prove the income or deductions on a return, which means some documents stay for years and others for much longer. Employment tax records are the clear minimum to remember: keep those for at least four years. Payroll, asset purchases and anything tied to an open dispute belong in the longer pile. The details are on irs.gov.

A filing routine that survives a review

• Keep the current year's records where you work, and archive closed years somewhere you can still reach them.
• Store purchase and sale documents under the period they belong to, not the date you filed them.
• Keep asset records until the asset is sold, then hold them for the full retention period.
• Back up digital records, and label the backup so you know which year it covers.

The bottom line

Work out your minimum retention period on gov.uk, add a margin for assets and payroll, and then stick to one filing method. Deleting records early is the mistake you cannot undo.