Do you need to keep receipts for tax purposes?

Every self-employed person knows (or atleast should know) 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.

Small businesses might find keeping hold of receipts very handy for personal as well as tax records; it’s always a good idea to have an idea of your income and expenditure. 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. This includes:

• Invoices
• Bank statements
• VAT records
• Credit card statements
• 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 prefer, these days most will be digital anyway. Scanning any physical receipts so you have a digital copy is definitely recommended – just make sure whatever you choose to do, it’s legible!

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

The rule of thumb is to keep receipts for five years if you’re a sole trader (six years if you’re a limited company). But in general, it’s probably just best to just keep them indefinitely. 

A backed-up hard drive will be your best friend and is much more reliable than overflowing folders shoved in a cupboard somewhere (speaking from experience!)

Bear in mind that 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 currently being investigated, don’t throw anything away!

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 which is why we’d recommend holding on to them. It is also probably easier than remembering the time and value of purchase. But luckily, a bank statement may step in as proof if you do misplace a receipt you eventually end up needing.

Um, I may have lost my receipts…

First of all, don’t panic! It happens to the best of us. But you should let HMRC know straight away. It’s better to let them know beforehand as if they suddenly ask you to show receipts for an investigation, it could get pretty awkward.

You can provide estimates within your Self Assessment 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 submitting your tax return. 

Help! I’m still not sure!

No need to panic, TaxScouts can help you to understand what you can and can’t expense and guide you through the whole tax return process. 

Should HM Revenue and Customs come calling for an investigation, you’ll already have all of your receipts ready to go!