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Have you ever been asked, “Would you like a receipt?” and just said no? Think twice about that! It might seem like no big deal, but hanging on to receipts—especially if you’re running a business—can be way more important than you realise. Seriously, it could be the key to saving some cash on your taxes or avoiding hefty fines. Here’s the lowdown in simple terms.
Why Are Receipts So Important?
For everyday shoppers, not having a receipt usually isn’t a big deal. You still have rights if a product is faulty, even without one. However, receipts are vital for business owners, freelancers, and the self-employed. HMRC expects you to keep clear, accurate records of every expense you claim. If you don’t, you could face penalties, investigations, or even legal trouble.
What Counts as a Proper Record?
Good news: HMRC doesn’t force you to keep your records in a specific way. You can use paper receipts, digital photos, scanned copies, or store them in record-keeping software. The only rule is that your receipts must be complete (front and back if needed), readable, and available when HMRC asks.
But be warned: recent tax rulings show HMRC is becoming stricter. In the case of Mediability v HMRC [2023], the taxpayer tried to use only bank statements to back up business expenses. The result? HMRC disallowed most of the claims because no actual receipts were showing what the money was for.
Bank statements show that you spent money but not what you spent it on. That’s why receipts or invoices are essential—they prove the nature of the expense.
Can You Use Estimates?
Yes—but carefully. If you’re self-employed and doing your Self Assessment, you can use reasonable estimates in some cases. For example, if you drive your own car for work, you might estimate your mileage based on your logbook. But if HMRC thinks your estimate is suspiciously high or low, they can ask for proof—or launch a full inquiry.
If you rely too heavily on guesses instead of actual records, you could end up in hot water. It’s okay to use an estimate once in a while, but it shouldn’t be your go-to method.
What Are Simplified Expenses?
Here’s some help for the self-employed: HMRC lets you use simplified expenses for certain types of costs. This means you can claim flat rates without needing to keep piles of receipts. However, this shortcut is only available for:
- Business vehicle costs
- Working from home
- Living at your business premises (like running a B&B)
These rules only apply to self-employed individuals and partnerships. If you’re a limited company or a partnership with a corporate partner, you must keep detailed records for all expenses.
Let’s say you work from home 25 hours or more per month—you can claim a fixed amount instead of tracking heating, electricity, and internet bills. It’s a real time-saver! If you work between 25 and 50 hours a month, the flat rate is £10. Work between 51 and 100 hours, and you can claim £18. For 101 hours or more, the allowance goes up to £26 per month.
How Long Should You Keep Receipts?
Don’t throw out that receipt too soon! If you file a self-assessment tax return, you must keep your records for five years after the 31 January deadline for that tax year. For example, if you filed your 2018/19 return by 31 January 2020, you can safely dispose of the records after 31 January 2025.
Some documents—like those for buying or selling property—should be kept even longer in case you need them for future capital gains tax calculations.
If you run a company, you need to keep your business records for at least six years from the end of the last financial year they relate to.
What Is Making Tax Digital (MTD)?
Get ready: record-keeping is going digital! Under HMRC’s Making Tax Digital (MTD) initiative, VAT-registered businesses must already use software to keep digital records and submit returns. But that’s just the beginning.
Starting April 2026, unincorporated businesses and landlords earning over £50,000 from business or property income will also have to switch to MTD. By April 2027, the threshold drops to £30,000. This means more people will need to use software to log income and expenses.
In January 2025, HMRC published its full list of MTD requirements. It recommends using apps like Dext (formerly Receipt Bank), which lets you take a picture of a receipt and automatically load it into your accounting software. It’s easy, fast, and fully compliant!
Protect Yourself and Your Business
Keeping receipts is important for managing your money well. Without records, you could miss out on tax deductions, face fines, or deal with an IRS audit. Always keep receipts for meals, business expenses, and utility bills. Store them safely in a shoebox, scan them to save digitally, or use a financial management app. Organising your financial records will simplify tax season and provide better insight into your spending habits, improving budgeting and decision-making.
Stay ahead, stay organised, and turn your receipts into powerful proof that protects your business.