It is important to keep records, so that organisations such as the Inland Revenue can be clear on how you received your income, and what income is taxable.
Multiple Bank Accounts
When you perform work, you know that you must raise an invoice for payment. Try to ensure this all gets paid into one main bank account so that all money can be easily accounted for. Record keeping is vital to ensure that when the Taxman or Vatman comes visiting, that he does not tax you on any unexplained income which cannot be tracked back to a sales invoice.
This situation could occur where a business account exists but amounts are paid into any number of other personal bank accounts. The genuine self employed income gets mixed up with other income and information to support income in those personal records is non-existent.
We’ve seen it happen and the Inland Revenue will want to try to tax you on this other income, if you cannot provide evidence as to what it is.
Each sales invoice raised for work done should have an invoice number. Ensure that the numbers follow on from each other and keep any that have been spoilt or had to be amended. If any are missing, the taxman will assume that you were paid in cash and that you immediately destroyed the missing invoices to reduce your income. Keep all invoice records even where you have had to make out a new invoice as a replacement.
If you are in business it is a good habit to keep ‘other’ records, for example, diaries, quotes etc. also keep all personal bank statements and make a special note of any monies paid into these accounts and from where they came e.g. loans or gifts from family members. Record this as soon as possible after the event – it is always more difficult to remember details at a later date.
The Inland Revenue often treats unidentified amounts as additional income unless you can prove otherwise. This is a classic attack used by the Revenue to get their hands on your money.
If you really feel that record keeping is not your cup of tea, and would rather not worry about the hassle, then why not get us to do it for you?
If you are in doubt as to which records to keep, why not give me a call?Mark