What length of time you should keep financial statements for

Whether in electronic or hard copy format, you are very likely to receive your financial statements – bank account, credit card, utility bills and others – on a monthly basis.

These statements are important for several reasons: you can use them to support the information you provide on your tax return submission, to reconcile amounts spent or check for fraud.

But the question arises: how often should you hold on to this information for?

Keep reading below for the answers.

Keeping bank statements

As a business owner – whether a sole trader, limited company, freelancer or a partnership – you know how important it is to ensure your accounts are in order through the annual submission of your tax returns.

This is valid for both individuals and businesses.

Bank statements issued by your bank are an important source of information for income earned, expenses incurred, donations made or for general proof of payments.

According to advice from the HMRC in the UK, bank statements should be kept for a period five years after the 31 January deadline for submitting returns.

Ultimately, you will want to keep your bank statements for up to six years in case there are any unresolved disputes which you’d like to have addressed.

Credit card statements

While bank statements are important for completing your taxes, this is not really the case with credit card statements.

This is why you don’t need to keep them – in either hard copy or electronic format – for longer than it takes for you to reconcile your statement with the payments you’ve made to ensure that there were no fraudulent transactions made with your credit card.

What about utility bills?

On the other hand, utility bills, much like bank statements, should be kept for the six-year period mentioned above for several reasons.

Wi-Fi, energy and water, phone bills etc. are important for submitting your tax returns, especially if you work from home.

They can serve as an important source of expenses incurred in the daily running of your business.

What should you do with old financial statements?

Once the six-year period has passed, you’re welcome to discard your old documents.

However, make sure you do so safely.

Purchasing a relatively inexpensive shredder will help you not only discard your documents properly, but you’ll also ensure that no one has access to private and sensitive information which will enable them to commit identity fraud with it.

Conclusion

While banks generally have a legal obligation to keep records of their customers and their transactions for a given period of time, it would be wise for you to follow their lead and keep your bank statements and utility bills for up to six years.

This will ensure that you can go back and support disputed information based on facts and evidence, and will also enable you to submit thoroughly completed tax returns every year.

Here’s what you need to remember:

• Keep bank statements for up to six years after receiving them;
• Double-check your credit card statements and dispose of them after reconciling them and checking that there were no fraudulent payments made with your card;
• Utility bills should also be kept for up to six years after receipt;
• Once the six-year period has passed, shred your documents.

So, don’t throw away those financial statements just yet!

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.