We’ve all been there—buy something in a shop, and you’re asked, “Would you like a receipt?” For personal purchases, it’s usually just a matter of preference. But for businesses, receipts are crucial—especially if HMRC comes knocking!
Failing to keep proper records can lead to penalties, disallowed expenses, or even legal action. So, how should you keep records, and what happens if you lose a receipt? Let’s break it down.
What Counts as ‘Proper Records’?
HMRC doesn’t require a specific method for keeping records, but your system must be accurate, accessible, and complete. This means:
- Paper receipts – Traditional but risky (they fade, get lost, or become illegible).
- Digital copies – Scanned, photographed, or stored in software (recommended for security).
- Accounting software – Tools like Dext (formerly Receipt Bank) integrate receipts into Making Tax Digital (MTD) systems automatically.
What’s NOT enough? Bank statements alone do not prove a business expense. HMRC recently ruled in the case of Mediability v HMRC [2023] that expenses without supporting receipts can be disallowed—even when bank transactions clearly show the spending.
Tip: Always keep both the front and back of a receipt (some have key details on the reverse).
Can You Use Estimates for Expenses?
Sometimes, you might not have a receipt—so, can you estimate expenses instead?
Yes, but only in certain cases. Self-employed taxpayers can use estimates if they are reasonable and based on clear methods, such as:
- Using a logbook to estimate mileage
- Calculating expenses based on industry standards
However, regularly relying on estimates without improving record-keeping can raise red flags with HMRC.
What Are Simplified Expenses?
To make life easier, HMRC allows self-employed individuals and partnerships to use simplified expenses—fixed rates for certain costs, meaning no need to keep detailed receipts.
Simplified expenses apply to:
- Vehicle expenses (flat rate per mile instead of tracking fuel and maintenance)
- Working from home expenses
- Living at business premises
For example, home working expenses can be claimed at a flat rate:
| Hours Worked from Home per Month | Flat Rate Claim |
| 25 to 50 hours | £10 per month |
| 51 to 100 hours | £18 per month |
| 101+ hours | £26 per month |
Who CAN’T use simplified expenses? Limited companies and partnerships with corporate partners must keep full records.
How Long Should You Keep Receipts?
Different rules apply depending on how your business is structured.
- Self-employed & individuals – Keep tax records for at least five years after the 31 January tax return deadline.
- Limited companies – Retain records for at least six years from the end of the financial year they relate to.
- Property owners – Keep records longer if they relate to property purchases, as they may be needed for future Capital Gains Tax calculations.
Example: If you submitted your 2018/19 tax return on 31 January 2020, you can safely dispose of those records after 31 January 2025—unless they relate to assets still held.
Making Tax Digital (MTD) – The Future of Record-Keeping
HMRC is moving towards digital-first record-keeping with Making Tax Digital (MTD).
Key dates:
- MTD for VAT is already in place—VAT-registered businesses must keep digital records using MTD-compatible software.
- MTD for Income Tax begins in April 2026 for unincorporated businesses and landlords with income over £50,000.
- From April 2027, it will apply to those earning over £30,000.
🔹 What does this mean for receipts?
HMRC expects businesses to use software that scans and uploads receipts automatically—like Dext (formerly Receipt Bank)—reducing the need for paper copies.
What Should You Do Now?
- Go digital – Scan and save receipts using apps like Dext, Xero, or QuickBooks.
- Know the deadlines – Keep records for the correct length of time.
- Be prepared for MTD – If you’re self-employed or a landlord, start using MTD-compatible software now to stay ahead.
Good record-keeping isn’t just about compliance—it protects your tax relief and keeps HMRC happy.
Need help getting your receipts in order? Jon and the team are here to help!
Call us today or drop us a message—we’ll make sure your business stays compliant!
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