What Records Must a Charity Keep for HMRC

Introduction

Good record-keeping is a legal requirement for all charities, no matter their size. HMRC and the Charity Commission expect charities to maintain accurate and transparent financial records that show how money is raised and used.

Keeping proper records not only ensures compliance but also helps charities claim Gift Aid, apply for funding, and demonstrate accountability to donors. Poor record-keeping can lead to penalties, loss of tax relief, or even regulatory investigation.

Understanding what records to keep and how long to retain them is essential for every trustee and treasurer.

Why charities must keep records

Charities are granted tax advantages by HMRC, such as exemption from corporation tax on charitable income and the ability to claim Gift Aid. To maintain these benefits, charities must be able to prove that all income is used for charitable purposes and that financial controls are in place.

Records help:

Show that the charity’s funds are used correctly

Support Gift Aid claims and other tax relief applications

Provide evidence for HMRC and Charity Commission reviews

Prevent fraud and financial mismanagement

Support the preparation of annual accounts and reports

In short, keeping accurate records protects the charity’s finances and reputation.

The main records a charity must keep for HMRC

1. Income and expenditure records

Your charity must record all money received and spent. This includes:

Donations (cash, cheques, and online payments)

Membership subscriptions and fundraising income

Trading income, such as sales from charity shops or events

Grants and sponsorships

Investment income, such as interest or dividends

All expenses, including rent, salaries, supplies, and travel

Each entry should include the date, amount, source or recipient, and purpose of the transaction. Supporting evidence such as invoices, receipts, and bank statements must be kept for verification.

2. Donation and Gift Aid records

If your charity claims Gift Aid, HMRC requires you to keep detailed records for every donation. These must show:

The donor’s full name and address

The amount donated and date received

A copy of the donor’s Gift Aid declaration

Details of any benefits or rewards provided in return (if applicable)

The total Gift Aid claimed and how it was calculated

Gift Aid declarations can be paper-based or digital but must be retained for six years from the end of the accounting period in which the donation was received.

3. Payroll and PAYE records

If your charity employs staff, you must operate PAYE (Pay As You Earn) and keep payroll records as any employer would. These include:

Employee details (name, address, NI number)

Gross pay, tax, and National Insurance deductions

Payslips and P60s

Pension contributions and expenses payments

Payroll records must be kept for at least three years after the end of the tax year they relate to.

4. VAT records (if registered)

Charities that are VAT-registered must keep full VAT records to comply with HMRC rules. This includes:

VAT invoices issued and received

VAT returns submitted to HMRC

Details of zero-rated or exempt supplies

Import and export documentation (if relevant)

VAT records must be retained for six years and stored digitally if your charity is part of the Making Tax Digital (MTD) system.

5. Trading and subsidiary records

Some charities run trading subsidiaries or shops to generate income. These activities must be clearly separated from charitable operations. Keep:

Separate bank accounts and accounting records for each entity

Records of transactions between the charity and its trading arm

Details of profits transferred to the charity under Gift Aid

This separation ensures transparency and prevents accidental breaches of charity tax rules.

6. Property and asset records

If your charity owns property, vehicles, or other significant assets, maintain detailed records showing:

Purchase or lease agreements

Maintenance costs and depreciation

Insurance policies

Sales or disposals of assets

Evidence of ownership and how the assets are used

These records help demonstrate that assets are being used for charitable purposes and assist with financial reporting.

7. Bank and investment records

All bank accounts used by the charity must have clear documentation, including:

Account opening details and signatories

Monthly bank statements

Deposit and withdrawal records

Reconciliations showing that balances match accounting records

Investment reports and statements for any savings or portfolios

Trustees should regularly review these records to monitor financial health and detect any irregularities.

8. Trustee meeting minutes and governance documents

HMRC may request evidence that trustees are properly managing the charity. You should therefore keep:

Minutes of trustee meetings

Copies of annual reports and accounts

The charity’s governing document (constitution or trust deed)

Records of trustee appointments and resignations

Conflict of interest declarations

These documents show that trustees are making informed decisions and fulfilling their legal duties.

How long should charities keep records

HMRC’s general rule is that charities must keep financial and tax records for at least six years after the end of the accounting period they relate to.

However, certain records may need to be kept longer:

Property deeds and leases should be retained indefinitely.

Records relating to Gift Aid donations must be kept for six years.

Employment records should be kept for at least three years after an employee leaves.

If your charity is involved in ongoing legal or tax matters, retain the relevant documents until the issue is resolved.

Storing charity records

Records can be kept in paper or digital format, provided they are accurate, complete, and accessible. Many charities now use cloud-based accounting systems to manage records securely.

When storing records digitally:

Ensure files are backed up regularly.

Use secure passwords and encryption where possible.

Limit access to authorised personnel only.

Keep a clear record of where documents are stored.

The aim is to maintain confidentiality while ensuring HMRC and auditors can access information easily if needed.

Common mistakes to avoid

Failing to keep Gift Aid declarations or losing donation records.

Mixing personal and charity finances.

Not reconciling bank statements with accounting records.

Ignoring record retention periods.

Relying on one person to maintain all financial data without oversight.

Avoiding these mistakes strengthens financial governance and reduces the risk of compliance issues.

Trustee responsibilities

Trustees are ultimately responsible for ensuring that proper records are kept and retained. Even if bookkeeping tasks are delegated to staff or accountants, trustees must still monitor and review financial information regularly.

They should confirm that systems are in place to protect assets, prevent misuse of funds, and comply with both HMRC and Charity Commission requirements.

Conclusion

Charities must keep detailed and accurate financial records to satisfy HMRC and maintain their charitable status. These include income and expenditure records, Gift Aid declarations, payroll information, VAT documentation, and governance papers.

Keeping records for at least six years, maintaining transparency, and using proper financial systems ensures compliance and builds confidence among donors, regulators, and beneficiaries. Good record-keeping is not just a legal duty—it’s a cornerstone of good charity management.