Martin Lewis has issued a stern caution about maintaining your financial records in proper order. He warned that failing to keep your essential paperwork up to date could lead to significant problems with HMRC.
A query arrived on his BBC podcast from somebody hoping to digitise their documents. They were keen to know which contracts and financial products they ought to keep an original paper version for. Responding, Mr Lewis first outlined a general timeframe worth noting. He explained: "The conventional wisdom is you only need to keep bank, credit card and other personal finance documents for six years, because HMRC - the tax office - is said to only be able to ask you to go back that far."
Just in case
He continued by saying the rules can be more lenient for certain individuals - though you might still wish to err on the side of caution. The consumer expert added: "HMRC only requires tax records to be kept for most people doing self assessment for 22 months after the end of the tax year. Limited companies must generally keep accounting records for at least six years. But I would probably go for the six years anyway for safety just in case you have a tax investigation." He was emphatic about why you'll want to have everything in order in case the taxman pays you a visit. Mr Lewis stated: "There is nothing worse than a tax investigation. They have huge powers, it can be very distressing."
HMRC has extensive powers to order businesses and other organisations to hand over information about their financial dealings, including details of their records and payments. For individual people, they can require your bank to hand over information when this is deemed necessary, or contact a person's employer to get the details they need.
It could be decades
Discussing more broadly how long financial documents should be retained, Mr Lewis referenced a blog post he'd previously written on this matter. He previously stated: "Evidence of systemic mis-selling often takes years to work through the system. If it's related to a pension, it could be many decades, so it's impossible now to know what you may need the paperwork of in a few years' time. Therefore for safety, keeping all documents for as long as you can, even for now closed products, is a reasonable precaution." Mr Lewis said this principle has been vindicated recently, with the on-going car finance scandal and forthcoming compensation scheme.
This relates to mis-sold car finance deals between April 6, 2007 and November 1, 2024, so if you took out a deal back then, it could be a big help to still have the documents now. The average typical compensation payout per claim is thought to be £83, although these are unlikely to be paid out until at least 2027.
Given the possibility of a historical issue such as this, Mr Lewis had some clear advice for listeners. He said: "You don't want to keep a record of every payment you've ever made, but for most major transactions, products or services, I would want to keep my sign up documents, any upgrade documents and any closure documents, which detail what was paid, what wasn't paid and what the terms were."
Key documents checklist
He provided a breakdown of the financial products for which you should retain these important records:
- Loans
- Credit cards
- Mortgages
- Car finance hire purchase
- Two bank statements for each year showing interest, fees and add-ons, including downloading key statements before switching or closing accounts, such as for package bank accounts or savings accounts
- Booking confirmations for flights or costly travel
- Other costly purchases, including any warranty or guarantees.
Mr Lewis concluded with a key principle: "Anything that's enough to prove what you had, is where I would go with this."
