- Business record retention runs from three to seven years for normal tax returns and stays open forever when no return is filed.
- US IRS rules require three years for ordinary tax receipts, while UK HMRC requires limited companies to keep accounting books for six years.
- Asset purchase receipts, deeds and commercial loan terms follow their own timelines outside tax rules.
How long to keep business records depends on where you pay tax and what return the record supports. Check local rules first. In the US, the IRS asks small firms to save basic tax records for three years. In the UK, HMRC requires limited companies to keep accounting books for six years.
Old advice says keep everything seven years. That rule is often wrong. It wastes money and space. Regulators set different clocks for payroll, tools and sales tax. Some files stay forever.
Statutory retention periods by record type
Firms trade across borders. The clear table below compares main tax file deadlines set by the IRS and HMRC.
| Record category | US IRS requirement | UK HMRC requirement |
|---|---|---|
| Routine tax returns and receipts | 3 years from filing date | 6 years from financial year end |
| Employment taxes and payroll files | At least 4 years after tax is due | 3 years from end of tax year |
| Capital assets and property invoices | Until limitations expire for year sold | 6 years after accounting period sold |
| Bad debts and worthless securities | 7 years from return due date | 6 years from relevant financial period |
| Unreported gross income over 25% | 6 years from filing date | Up to 20 years for deliberate omission |
| Unfiled returns or suspected fraud | Indefinitely (no statutory limit) | Indefinitely (no statutory limit) |
| Statutory company registers | Permanent company archive | Permanent company archive |
These dates protect your firm during an audit. Stop paying for old storage.
How long to keep financial records for US IRS compliance
The IRS links paper retention to the legal audit window. This window is the time the tax office has to review returns. For most standard returns, that legal window ends three years after you file.
Staff payroll files have a longer floor. You must save all wage records, tax forms and payment receipts for at least four years after tax is due. Check our guide on estimated tax dates to keep your quarterly payments on track.
A six-year rule applies if you miss large sums of income. If a return leaves out more than 25 percent of gross income, the audit window doubles to six years. When checking team expenses, follow our small-business expense approval guide to keep receipts tidy.
How long to keep accounts records for UK HMRC and Companies House
UK rules are stricter than US federal rules. Under the Companies Act, limited companies must keep accounting records for six full years from the end of the financial year they cover. This includes sales slips, bills, bank statements and stock tallies.
Sole traders have a slightly shorter timeline. Self-employed workers must save tax records for at least five years after the January 31 online filing deadline. If you file late, keep your records longer.
Sales tax rules add extra checks. As shown in our guide on UK VAT registration rules, firms must keep digital VAT records for six years. Tax officers often review old invoices during vat audits.
Property, asset and depreciation records have a separate timeline
Bills for plant and tools do not expire while you still own the gear. The IRS requires you to save equipment records until the audit window closes for the year you sell or scrap the item. Those papers prove original costs and past depreciation deductions.
Say you buy a van in 2020 and sell it in 2030. Keep the buy bill until 2034. Sorting by buy date causes staff to shred needed asset papers too early.
Commercial contracts, employment files and non-tax retention rules
Others check books too. Insurance policies, bank loans and client contracts often ask for records long after tax deadlines pass. When making a simple small-business budget, include low-cost digital backup storage.
Staff safety files also have special rules. UK safety rules require keeping some injury reports for many years. Keep major client contracts on file until local contract claim limits expire.
The five-point record retention policy you can actually maintain
A good file policy uses simple tags rather than large metal drawers. Put these five habits to work in your weekly bookkeeping routine:
- Tag bills early: Mark each bill as cost, payroll or capital asset right away.
- Set shred dates: Write the throw-out year on every digital folder at tax time.
- Track non-tax files: List loans, leases and key deals on a single sheet.
- Use clean digital scans: Both tax bodies take scans if pages stay sharp and easy to read.
- Run an annual check: Check old archive files each January and delete expired folders.
The two situations where records must be kept permanently
Two rare cases never expire. If a firm never files a return, the legal audit clock never starts. Likewise, if someone files a false return, tax officers can audit the books at any point in the future.
Founding documents must also stay safe for the full life of the business. Keep company birth certificates, share ledgers, seal books and board notes safe as long as the firm exists.
Frequently asked questions
Can small businesses discard paper receipts if digital scans exist?
Yes. Both tax agencies accept digital copies if files are clear and complete. Keep copies on a safe drive ready for review.
Does the six-year UK HMRC retention rule apply to payroll records?
No. HMRC asks bosses to keep PAYE payroll records for three years from the end of the tax year they cover.
From what exact date does the IRS three-year retention clock start?
The three-year clock starts on the date you file the return or the due date, whichever comes later.
How long should businesses keep bank statements?
Save bank files for three years in the US and six years in the UK to prove reported costs.
Sources
IRS: How long should I keep records? · GOV.UK: Running a limited company company and accounting records · GOV.UK: Keeping your pay and tax records. Check official government tax sites before discarding historical business records.