So you’ve started a business and things are going well. But now you have several invoices and don’t know what to do with them. Do you need to keep them or can they be thrown away once you’ve received payment? In this article, I’ll explain how long you need to keep a record of your invoices and why it’s important.
In the UK, invoices are accounting documents and need to be kept for 6 years from the end of the financial year it relates to. This includes both sales invoices you issue to customers as well as purchase invoices you receive from suppliers.
Why do I need to keep invoices?
Invoices are essentially supporting documents to prove your business finances. They can be requested by HMRC, for an audit, or as proof during litigation.
Any proof of incoming or outgoing money from your business needs to be properly documented and retained for 6 years. This includes any accounting records such as invoices, purchase receipts, contracts, VAT Reports, balance sheets, PAYE records, etc.
HMRC has the right to check your business records to ensure you are paying the correct amount of tax.
Another reason to keep invoices for this amount of time is that you can chase any unpaid debt up to 6 years after the fact. If you come across an overdue invoice that was from a couple of years ago, legally you are entitled to payment from the customer. You can read more on our blog about time limits for issuing invoices.
If for whatever reason your accounting records were lost or destroyed, then you must try to recreate them, and contact HMRC right away for advice.
Fines for not retaining invoices
If you don’t keep your invoices and accounting records for 6 years from the end of the fiscal year it relates to, you may incur fines from HMRC.
The fines increase based on the seriousness of the offence. If you are in your first year of business, the fine will be £250. If, however, you intentionally destroy your records, you could be fined up to £3000.
If you are the director of a company and you do not meet your record-keeping responsibilities, you could also be fined or disqualified.
Keeping invoices electronically
If you were to keep paper accounting records for 6 years, you would likely have large stacks of paperwork to store. Fortunately, it is not required to have these records in paper form, they can instead be stored electronically.
You can keep PDF invoices stored on your computer hard drive, but this could cause headaches if your computer crashes and you lose all of your data. As an alternative, we suggest using invoicing software to keep all of your data stored on the cloud.
This means that you will never lose your data and will be able to access it anytime, from any device with an internet connection.
Invoicing software like Debitoor not only helps you create and store your invoices, but it also helps you keep track of your payments, VAT Reports, and accounting records like the profit & loss statement.
Archiving invoices with invoicing software
With Debitoor, you also have the option of archiving your invoices so they are saved to your account, but disappear from most of your lists. This way, you can archive old invoices that have already been paid and don’t require further attention, but still access them if needed.
This will also help you organise your invoice lists to only include invoices from the current financial year, and give you an easier overview of invoices that require attention.
Feel free to give it a try with our 7-day trial. No credit card required, and no commitments.