Buy an item in a shop and you will increasingly be asked whether you want a receipt. Although a receipt provides useful evidence of purchase, it is not mandatory to produce one (unless both the seller and buyer are VAT-registered) and consumer rights are not limited without one.
However, if you are in business, HMRC views this differently; failing to keep proper records may lead to penalties if HMRC investigates and finds missing or inaccurate records. These penalties can range from financial fines to legal actions.
What are 'proper records'?
HMRC does not prescribe a specific method for record-keeping. HMRC will accept paper receipts or digital copies (such as scanned or photographed documents on a mobile device or saved on software programs), as long as the chosen method captures all the necessary information (front and back) and is presented in a readable format when required.
Recent tax cases would appear to confirm that HMRC is increasingly looking to disallow expenses not supported by receipts. For example, in Mediability v HMRC [2023] UKFTT 315 (TC) the taxpayer claimed significant business expenses without maintaining receipts, relying instead on bank statements. The Tribunal ruled that bank statements alone were insufficient proof and the expenses were mostly disallowed. Therefore, whilst bank statements can support claims, they must be accompanied by receipts or invoices showing the nature of the expense.
Use of estimates
For self-assessment taxpayers, estimates are acceptable so long as they meet specific criteria and are based on reasonable assumptions or methods, e.g., estimating vehicle mileage based on a logbook. If estimates appear unreasonably low or high, HMRC may request evidence or conduct an inquiry.
Regularly using estimates without improving record-keeping could raise red flags.
Simplified expenses
Some expenses (termed 'simplified expenses') allow estimates when calculating certain business expenses if no receipts are available; this can reduce the administration of collecting and recording receipt details.
Note that simplified expenses are optional and can only be used by self employed individuals and partnerships; limited companies and partnerships with one or more corporate partners cannot. If not covered by simplified expenses, all expenses claimed must have supporting documentation.
Simplified expenses relate only to vehicles, working from home expenses or expenses incurred when living on business premises. For example, a claim for home working can only be made if working for 25 hours or more a month from home as follows:
Hours of business use per month Flat rate per month
25 to 50 £10
51 to 100 £18
101 and more £26
How long should receipts be kept?
For self-assessment taxpayers, tax records must be kept for at least five years after the 31 January self-assessment tax return submission deadline. Therefore, records relating to the 2018/19 tax year can be disposed of after 31 January 2025. However, some records will need to be retained for much longer, e.g., in relation to the purchase of a property, for future capital gains tax purposes. Corporate taxpayers should retain records for at least six years from the end of the last company financial year to which they relate.
Making Tax Digital
Under Making Tax Digital (MTD), VAT registered businesses must keep digital records using compatible software. From April 2026, MTD for Income Tax will apply to unincorporated businesses and landlords with business or property income, or both, over £50,000 (applying to those with income over £30,000 from April 2027). On 17
January 2025 HMRC published a notice setting out the record-keeping requirements for MTD. These include requirements to use software compatible with MTD to create digital records of business income and expenses. HMRC's ideal is for receipts to be scanned and automatically loaded into MTD-compatible software via use of such programs as Dext (formerly Receipt Bank).
