What Receipts Should I Keep as a sole trader?

‘What receipts should I keep for taxes?’ It’s a question many have puzzled over. After all, there are so many different types of records. Not to mention, there’s how you should keep receipts for taxes, and…

5 Minute Read

Last Updated: 5th April 2023

‘What receipts should I keep for taxes?’ It’s a question many have puzzled over. After all, there are so many different types of records. Not to mention, there’s how you should keep receipts for taxes, and the minimum time period to hold on to them too.

We’ve put this article together to answer these questions. At the end of it, you’ll be able to understand how to manage your tax expenses effectively. Let’s explore the topic…

What receipts will I need to hold on to?

It’s a good idea to always save receipts. This will give you an accurate view of your financial situation, simplify the process of submitting your tax return, and will also prove handy if HMRC ever make enquiries into your tax affairs.

HMRC recommends that you hold on to records for all sales and expenses. The receipts for taxes could include:

  • Sales invoices (as well as till rolls and bank slips if applicable)
  • Bank statements (along with chequebook stubs if you ever transfer money in this way)
  • VAT records (if you’re also VAT registered)
  • Staff PAYE records (if you have any employees)
  • Expenses related to your business (such as travel and office costs)
  • Records of personal income

To accurately keep receipts for your mileage, you should have an accurate mileage log. You’ll need information on the:

  • Dates of journey
  • Purpose of trip (either business or personal)
  • Start and end points
  • Miles travelled in total

Can I claim on expenses without receipts?

While it’s always best to hold on to any receipt, you may still be able to claim on tax-deductible expenses if you don’t have one. You just need to be able to satisfy a tax inspector by showing that you did make the purchase.

So, record the details around it – what was bought, who from, and the amount it cost. If you still have the item, then its tangible existence will help prove its legitimacy as a claim.

Even if there’s been no record, then you might still be able to meet HMRC’s requirements, provided you made a sensible estimate of how much was spent.

Do I need to keep physical receipts?

For the majority of business expenses, you don’t need to keep them in a paper format. A digital version is perfectly acceptable in most situations.

What is important to HMRC is generally not the format, but that the tax records are correct, complete and entirely readable. Otherwise, they may penalise you.

However, when you have a document that displays a direct tax deduction (other than VAT), you will be required to present physical evidence.

How long do I need to keep expense receipts?

As a basic rule of thumb, small businesses should hold on to their receipts for a minimum of five years after the 31st January Self Assessment tax return deadline for the given tax year.

You’ll need to keep them even longer if:

  • You file your return late
  • HMRC have initiated a check of your records
  • You’re buying and selling assets

This time period also varies depending on your reason for filing a return. The length of time is reduced to 22 months for individuals who aren’t carrying on a business, and extended to six years for those who also have Corporation Tax charges.

It’s worth noting that an HMRC tax investigation can go back 20 years if they believe there has been deliberate tax avoidance. They can therefore look at two decades worth of tax returns and the accompanying records.

How do I record receipts for taxes?

You can currently keep records and receipts in a paper format or an electronic format using tools like accounting software. You’ll want to ensure that the process of recording receipts isn’t too time-consuming or overwhelming. Otherwise, you may be more likely to make mistakes.

In order to file expenses correctly, it’s crucial that you arrange them by date and category. So separate them into groups, such as mileage, homeworking bills and equipment. You’ll then be able to more clearly keep track of your expenses, or if using simplified expenses would be more beneficial.

With MTD due to be extended to Income Tax in the near future, it makes sense to take photos of your receipts and store your files digitally. Plus, you’ll reduce the likelihood of losing them. Cloud tools like Google Drive, Dropbox and Evernote can enable you to keep your receipts as well as files.

Dropbox can be synced to Receipt Bank software, and Evernote has a handy offline photo capture system. However, a better idea is to use dedicated cloud tax return software which connects to HMRC – like GoSimpleTax.

GoSimpleTax allows you to upload and submit your receipts for tax instantly. We have a mobile app so you can file your tax on the go. You can even complete and send your Self Assessment tax return.

With automatic calculations and tax-saving suggestions, you may even have the opportunity to reduce your liability – without needing to be a tax expert.

Let’s recap

So, what receipts should you keep for taxes?

The records and receipts to hold on to include sales invoices, bank statements, and business expenses such as mileage. Some of these are tax-deductible, so you can make a claim for them on your tax return and potentially reduce the Income Tax you’ll pay for that tax year.

The period to hold on to these tax records varies – for small businesses, it’s generally five years. And the receipts for taxes can be stored using accounting software. Save receipts here, and you can also use the tools to file your tax returns successfully.

Now that you know all this, managing taxes and submitting your return will be much easier.

GoSimpleTax’s smart calculations and expense categorisation system can go one step further – making knowing your deductible expenses and dealing with records and receipts a breeze. Get started today or, if you have any questions, speak to a member of the team.

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Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.

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