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Do you need to keep receipts for tax purposes?

  • 3 min read
  • 18 Dec 2020
Do you need to keep receipts for tax purposes?

Every self-employed person knows that they need to keep track of their invoices for when tax return time rolls around – but do you need to keep receipts for tax purposes as well?

Whether it’s the coffee you bought for a client in Costa, the train you took to London for a meeting or the desk you bought for your home office so you don’t have to keep working on the kitchen table, those receipts are important. They can all be expensed. It’s important to keep hold of receipts for your own records, so you know how much you’re spending vs taking, but HMRC can also ask to see your receipts if they decide to audit you. 

What receipts do I need to keep?

HMRC recommends keeping receipts for all business expenses and sales. That includes:

  • Invoices
  • Bank statements
  • VAT records
  • PAYE records for staff
  • Personal income takings 
  • Expense receipts

Basically, if in doubt, keep it!

Do they have to be physical receipts?

They don’t! Whilst you can keep hold of physical receipts if you like, these days most will be digital anyway. Scanning any physical receipts so you have a digital copy is a good idea anyway, but you don’t then need to keep the original – just make sure it’s legible!

How long do I need to keep receipts for tax purposes?

While the rule of thumb is to keep receipts for five years if you’re a sole trader. It’s six years if you’re a limited company. But in general, it’s best to just keep them indefinitely. And that’s a lot easier with a backed-up hard drive than with overflowing folders shoved in a cupboard. 

Some people should keep their receipts for even longer than stated above. Although the standard of five or six years generally holds true, HMRC can launch a tax investigation for any return over the previous 20 years if they suspect any tax avoidance has gone on. So if you’ve ever filed your tax returns later, been investigated in the past or are being investigated currently, don’t throw anything anyway!

Do I need receipts to claim expenses?

Actually, no. You don’t need your receipts to submit for expenses. But you need to have them ready to go in case HMRC asks for them. If you know the time of purchase, value, and have a bank transaction, you may not need a receipt. When in doubt, you can check with an accountant. 

Um, I may have lost my receipts…

First of all, don’t panic! It happens to the best of us. However, you should let HMRC know straight away. It’s better to let them know before they ask you to show receipts for an investigation. 

You can provide estimates within your tax return if your receipts are lost or damaged, but you have to provide information on why you are estimating parts of your return. It’s best to discuss this with your accountant to make sure you estimate correctly.

So, do you need to keep receipts for tax purposes?

Keep everything. And back it up. Twice.

It’s better to be safe than sorry, and better to be over prepared than underprepared when it comes to taxes. TaxScouts can help you to understand what you can and can’t expense and guide you through the whole tax return process. And should HMRC come calling for an investigation, you’ll already have all of your receipts ready to go and will be able to answer their questions. It’s nothing to be afraid of, providing you’ve got everything ready, which, with TaxScouts, you will!

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