Receipt Keeping for Sole Traders: HMRC Requirements

HMRC requires all sole traders to keep records of all business income and expenses, including the supporting evidence for each transaction. For income, this means copies of all invoices you issue, records of cash payments received, bank statements showing deposits, and CIS payment statements if applicable. For expenses, this means receipts, bills, and invoices for every business cost you claim.\n\nThe records must be accurate, complete, and kept in a way that allows you to prepare a correct tax return. You do not need to submit receipts with your tax return, but you must be able to produce them if HMRC asks. This means having an organised system where you can quickly locate the receipt for any expense entry on your return.\n\nFor tradespeople, the most commonly needed records are materials purchase receipts from builders merchants and suppliers, fuel receipts or mileage logs, tool and equipment purchase receipts, van and vehicle running cost invoices, phone and broadband bills, insurance policy documents and premium receipts, and professional subscription confirmations.\n\nHMRC also requires you to keep records of any assets bought or sold for business use, including vehicles, expensive tools, and equipment. These records support your capital allowance claims and are needed to calculate any balancing charges if you dispose of an asset. Keep the purchase invoice, any finance agreement, and the sale receipt for every business asset.

You must keep your records for at least five years after the 31 January filing deadline for the relevant tax year. For the 2025/26 tax year, you would file by 31 January 2027, and records must be kept until at least 31 January 2032. This is a minimum period, and HMRC can extend it if they open an enquiry into your return.\n\nIf HMRC opens an enquiry, you must retain all records until the enquiry is concluded, even if this extends beyond the normal five-year period. Enquiries can be opened up to twelve months after the filing deadline for random checks, or up to twenty years after the end of the tax year in cases of deliberate tax evasion. While this extreme timeframe is rare, it underscores the importance of keeping thorough records.\n\nFor capital assets, keep records for as long as you own the asset plus the five-year retention period after you dispose of it and file the return that includes the disposal. If you buy a van in 2025 and sell it in 2030, you need to keep the purchase and sale records until at least 2036.\n\nMany tradespeople find it easiest to keep records indefinitely rather than calculating individual retention dates. Digital storage makes this practical, as scanned receipts take up negligible space. TradeTally stores all receipt images and transaction records in the cloud with no automatic deletion, ensuring your records are available whenever needed.

HMRC has confirmed that digital records are acceptable as evidence of business transactions, provided they are a clear and readable copy of the original. This means you can photograph or scan paper receipts and store them digitally instead of keeping the physical copies. For sole traders who accumulate dozens of receipts every week, this is a significant practical benefit.\n\nThe key requirement for digital records is that they must be a faithful reproduction of the original. A clear photograph taken with a modern smartphone is sufficient. The image should capture the date, the supplier name, the items or services purchased, and the amount paid including VAT where applicable. Blurred, partial, or illegible images are not acceptable.\n\nWith Making Tax Digital on the horizon, digital record-keeping will become mandatory rather than optional for many sole traders from April 2026. Getting into the habit of digitising receipts now means you will be ready for MTD without needing to change your processes. TradeTally's receipt scanner uses your phone camera to capture receipt images and automatically extracts the key information including date, amount, and supplier.\n\nFor those who prefer paper records, this remains acceptable as long as the records are complete and stored safely. The risk with paper is damage from water, fire, or simply being lost in a pile of other paperwork. If you do keep paper records, store them in a dedicated filing system organised by month and year, and consider photographing them as a backup.

Losing a receipt does not automatically mean you cannot claim the expense, but it does weaken your position if HMRC queries the claim. The first step is to try to obtain a duplicate from the supplier. Most builders merchants, trade suppliers, and utility companies can provide duplicate invoices or receipts, often accessible through your trade account online.\n\nIf you cannot get a duplicate, alternative evidence can support the claim. Bank or credit card statements showing the payment, email order confirmations, delivery notes, and even text messages arranging the purchase can all serve as supporting evidence. The more evidence you can assemble, the stronger your position.\n\nFor small cash purchases where no receipt was obtained, HMRC allows you to keep a record of the expense in a day book or digital record with details of the date, amount, supplier, and what was purchased. This self-recorded evidence is weaker than a third-party receipt but is better than nothing. Be reasonable about the amounts claimed without receipts, as HMRC will be sceptical of large unreceipted claims.\n\nThe best approach is to avoid losing receipts in the first place by capturing them immediately. When you buy materials from a supplier, photograph the receipt before it goes in your pocket. When you fill up with fuel, snap the receipt at the pump. TradeTally makes this a few seconds of effort and eliminates the risk of lost or faded receipts entirely.