Following the deadline for submission of self-assessment tax returns for the 2024–25 tax year, it is a useful time to revisit the rules on how long you should keep your tax records. There are no strict requirements for how records must be kept, but they should be retained either on paper, digitally, or within appropriate software.

For personal (non-business self-assessment records, you are generally required to keep them for at least 22 months after the end of the relevant tax year. This means records for the year ended 5 April 2025 should be kept until at least 31 January 2027. If you file your tax return late, you must keep the records for at least 15 months from the date of filing.

The types of records you should keep include those relating to:

• Income from employment e.g. P60, P45 or form P11D forms
• Expense records if you’ve had to pay for things like tools, travel or specialist clothing for work
• Documents relating to social security benefits, including Statutory Sick Pay, Statutory Maternity, Paternity or Adoption Pay and Jobseeker’s Allowance.
• Income from employee share schemes or share-related benefits
• Savings, investments and pensions e.g. statements of interest and income from your savings and investments
• Pension income e.g. details of pensions (including State Pension) and the tax deducted from it
• Rental income e.g. rent received and details of allowable expenses
• Any income which is open to Capital Gains Tax
• Foreign income

This is not an exhaustive list, and you should retain any additional records used in preparing your tax return.

Different rules apply for business records. Self-employed individuals must usually keep records for at least five years after the 31 January submission deadline. For the 2024–25 tax year, this means retaining records until at least 31 January 2031. Penalties may apply for failing to keep accurate and complete records.

As a general rule, someone who inherits property, money or shares is not liable to pay tax on the inheritance itself. This is because any Inheritance Tax (IHT) due is normally paid out of the deceased’s estate before assets are distributed to beneficiaries. However, the recipient may be liable to Income Tax on any income generated after the inheritance (for example, dividends from shares) and to Capital Gains Tax on any increase in value of the assets from the date of inheritance.

An important exception applies to gifts made during a person’s lifetime. These are known as Potentially Exempt Transfers (PETs). Such gifts become exempt from IHT if the donor survives for more than seven years after making the gift. If the donor dies within three years, the gift is treated as part of the estate on death for IHT purposes.

Taper relief may apply where death occurs between three and seven years after the gift, reducing the amount of IHT payable. In some cases, individuals take out insurance policies, such as seven-year term assurance, to cover any potential IHT liability during this period.

The position is more complex where the donor retains some benefit from the gifted asset. For example, gifting a house but continuing to live in it rent-free is treated as a ‘gift with reservation of benefit’. In such cases, the asset may still be subject to IHT, even if the donor survives for more than seven years. Additionally, IHT may arise if inherited assets are placed into a trust and the trust is unable to meet the tax liability.

You may have to pay Capital Gains Tax (CGT) tax when you sell or dispose of a property that is not your main home. This includes buy-to-let properties, business premises, land and inherited property.

Your gain is broadly the difference between what you paid for the property and what you sell it for. In some cases such as where the property was gifted or sold below market price you must use market value instead. If your total gains exceed the annual exemption, CGT will be payable.

For UK residential property, CGT is charged at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. You can reduce your gain by deducting allowable costs, such as legal fees, estate agent fees and the cost of capital improvements (but not routine maintenance).

You do not usually pay CGT on transfers to a spouse or civil partner, or to a charity. Special rules also apply to jointly owned property, overseas property and disposals from estates. If CGT is due on the sale of UK residential property, you must report and pay it within 60 days of completion. Keeping accurate records and reviewing your position early can help avoid unexpected liabilities and ensure you claim all available reliefs.

The employment status of a former bricklayer was recently called into question in establishing liability for asbestos exposure. The widow of the late Mr. Eric Alger, who died from mesothelioma, sought access to historical Employer’s Liability

Insurance. Mr. Alger had been contracted to work on a major refurbishment project in 1988. However, because the company had long since been wound up, it had to be restored to the register for this case to be heard. Mr. Alger had worked alongside demolition gangs on the site, although he claimed that he had never been provided with a mask or warned about the risks of asbestos.

The widow’s case was that, while Mr. Alger was self-employed for tax purposes, he was directly engaged by the company to work on the project. The High Court determined that, on the balance of probabilities, Mr. Alger was directly employed by the company and thus fell under the definition of an “employee” for the purposes of Employer’s Liability Insurance, allowing the widow to proceed with the claim for damages. As Mr. Alger had been moved between different areas of the site and performed general labour rather than just specialist bricklaying, the Judge concluded that he was effectively being managed directly by the main contractor and was effectively an employee.

While Mr. Alger was “self-employed” in the eyes of HMRC, if workers provide “labour only,” use the company’s tools, and are moved between tasks at the manager’s discretion, then they are classified as employees, allowing them access to compensation otherwise denied to truly independent businesses. This case further demonstrates that a company’s legal liability may persist long after it has been wound up.

This case has profound implications for any sector that provides equipment or infrastructure, yet declares its workers to be independent subcontractors. Moreover, this landmark ruling may not be confined to liability insurance and could also be extended to other areas of accountability. Employers should thus ensure that the roles of subcontractors are clearly specified.

Many business owners spend years building their companies but give far less attention to planning how they will eventually exit. In reality, a successful exit rarely happens by chance. It usually requires careful preparation several years in advance.

For most owners the business represents their largest financial asset. Without proper planning it can be difficult to realise its full value when the time comes to sell or transfer ownership. Potential buyers will expect to see reliable financial information, stable cash flow and well organised systems that allow the business to operate effectively without relying entirely on the owner.

Planning ahead also creates opportunities to manage the tax position more efficiently. The structure and timing of a sale, together with the availability of reliefs, can significantly affect the final amount of tax payable. Early planning allows these issues to be reviewed and structured properly.

Succession is another key consideration. Where a business is to be transferred to family members or senior employees, a gradual transition can help ensure the new leadership is fully prepared and that the business continues to operate smoothly.

An exit strategy also helps owners think about their own future plans and financial security. For these reasons, business exit planning should be treated as an important part of long term business strategy rather than a last minute decision.

Please call if you would like to consider your options.