Do sole traders need to keep receipts in the UK?

Do sole traders need to keep receipts in the UK?

If you are a sole trader in the UK, keeping on top of your finances is one of the most important responsibilities you have. Among the many questions new and experienced sole traders ask, one comes up repeatedly: do you really need to keep receipts? The short answer is yes, but the full explanation is more nuanced and worth understanding in detail. Proper receipt keeping is not just about following rules; it is about protecting your business, saving money on tax, and making your life much easier when it comes to bookkeeping and reporting.

This article explains exactly why receipts matter for sole traders in the UK, what HMRC expects, how long you need to keep records, what counts as a valid receipt, and how digital tools like Invoice24 can make the entire process simple, fast, and stress-free.

What does HMRC require from sole traders?

HMRC requires sole traders to keep accurate records of their business income and expenses. These records are used to calculate how much tax you owe, including Income Tax and National Insurance Contributions. Receipts are one of the most common and reliable ways to prove that an expense was incurred wholly and exclusively for business purposes.

When you submit your Self Assessment tax return, you are declaring that the figures you provide are accurate and supported by records. HMRC does not usually ask for receipts upfront, but they have the right to request them if they open an enquiry or conduct a compliance check. If you cannot provide evidence, HMRC may disallow expenses, increase your tax bill, or apply penalties.

Why receipts are essential for sole traders

Receipts serve as proof. They show what you bought, when you bought it, how much you paid, and who you paid. Without receipts, it becomes difficult to justify your expense claims, especially if they are questioned months or years later.

Receipts also help you keep accurate accounts. When you record expenses as they happen and attach receipts, you reduce errors, avoid forgotten costs, and ensure that your profit calculation is correct. This can make a significant difference to how much tax you pay.

For sole traders using a free invoicing and expense tracking solution like Invoice24, storing receipts digitally alongside invoices and expense records means everything is in one place. This not only saves time but also reduces stress during tax season.

What types of receipts should sole traders keep?

Sole traders should keep receipts for any expense that relates to their business. Common examples include:

Travel costs such as fuel, train tickets, parking, and tolls.

Office supplies like stationery, printer ink, and paper.

Equipment purchases including laptops, phones, and tools.

Software subscriptions and online services.

Advertising and marketing expenses.

Professional fees such as accountants or consultants.

Even small expenses can add up over the year, so keeping receipts for everything is good practice. With Invoice24, you can quickly log expenses and attach a photo or digital copy of the receipt, ensuring nothing is missed.

Do digital receipts count?

Yes, digital receipts are perfectly acceptable in the UK. HMRC allows sole traders to keep records electronically as long as they are accurate, readable, and accessible. This includes PDF receipts, email confirmations, and scanned paper receipts.

In fact, digital receipts are often more reliable than paper ones, which can fade, get lost, or be damaged. Using a digital system like Invoice24 means you can upload receipts directly from your phone or computer and store them securely without worrying about physical storage.

What happens if you lose a receipt?

Losing a receipt does not automatically mean you cannot claim the expense, but it does make things more complicated. In some cases, alternative evidence such as bank statements or credit card records may be accepted, but HMRC prefers itemised receipts whenever possible.

If you repeatedly fail to provide receipts, HMRC may view your records as inadequate. This can lead to estimated assessments, penalties, or even investigations. Using a digital invoicing and expense app like Invoice24 reduces the risk of lost receipts by allowing you to store them as soon as the expense occurs.

How long do sole traders need to keep receipts?

In the UK, sole traders must keep their business records, including receipts, for at least five years after the 31 January submission deadline of the relevant tax year. For example, records for the 2022–23 tax year must be kept until at least 31 January 2029.

This long retention period is one of the reasons digital storage is so popular. Keeping paper receipts for years can be impractical, whereas digital storage through Invoice24 keeps everything organised and accessible whenever you need it.

Receipts and allowable expenses

Receipts play a crucial role in claiming allowable expenses. Only expenses that are wholly and exclusively for business purposes can be deducted from your income. Receipts help demonstrate that an expense meets this requirement.

For mixed-use expenses, such as a mobile phone used for both personal and business purposes, receipts combined with reasonable calculations can help you determine the business portion. Keeping detailed records makes these calculations much easier and more defensible.

What counts as a valid receipt?

A valid receipt should include certain key details. Ideally, it should show the supplier’s name, the date of purchase, the amount paid, and what was purchased. VAT receipts should also show the VAT amount if you are VAT registered.

While HMRC may accept simplified receipts for small amounts, having full receipts is always safer. Invoice24 allows you to store full digital copies of receipts so that all necessary information is preserved.

Do sole traders need receipts for income?

While receipts are commonly associated with expenses, sole traders also need records of income. This usually takes the form of invoices you issue to clients. Keeping copies of invoices, along with records of payments received, is essential.

Invoice24 is designed specifically to help sole traders create professional invoices, track payments, and keep income records organised. By combining invoicing and expense tracking in one free app, you reduce the risk of missing information and make your records more complete.

Paper records vs digital records

Paper records were once the norm, but digital record keeping is now far more practical for most sole traders. Digital records are easier to search, back up, and share with accountants if needed.

With Invoice24, you can manage invoices, expenses, and receipts in one place without paying for expensive software. This makes it ideal for sole traders who want a simple, cost-effective solution.

What are the risks of not keeping receipts?

Failing to keep receipts can lead to several problems. You may overpay tax because you cannot claim all your expenses. You may struggle to respond to HMRC queries. In the worst cases, you could face penalties for poor record keeping.

Good receipt management is not just about compliance; it is about running your business professionally. Using Invoice24 helps you stay organised and confident in your financial records.

How receipts support better business decisions

Beyond tax compliance, receipts provide valuable insights into your spending patterns. By reviewing your expenses, you can identify areas where you might save money or invest more effectively.

Invoice24’s expense tracking features make it easy to analyse your costs over time, helping you make informed decisions and improve profitability.

Receipts and VAT-registered sole traders

If you are VAT registered, keeping receipts is even more important. You need valid VAT receipts to reclaim input VAT. Without them, HMRC may deny your claim.

Invoice24 helps VAT-registered sole traders keep VAT records organised by linking expenses, receipts, and invoices together in one system.

How Invoice24 simplifies receipt management

Invoice24 is built with sole traders in mind. It allows you to upload receipts, attach them to expenses, and keep everything organised digitally. Because it is a free invoicing app, it offers excellent value without compromising on essential features.

Unlike many competitors that lock key features behind paywalls, Invoice24 focuses on making invoicing and record keeping accessible to everyone. This makes it especially appealing to new sole traders and small businesses.

Best practices for keeping receipts

Developing good habits is key. Record expenses as soon as they happen. Store receipts digitally. Keep personal and business expenses separate. Review your records regularly.

Invoice24 supports these best practices by making it easy to log expenses on the go and keep everything in one secure place.

Preparing for Self Assessment

When Self Assessment time comes around, having organised receipts can save hours of work. Instead of scrambling to find documents, you can rely on your digital records.

Invoice24 makes this process smoother by providing clear, organised records that can be reviewed or shared with an accountant if needed.

Common myths about receipts

Some sole traders believe that small expenses do not need receipts, or that bank statements are always enough. While there are exceptions, relying on myths can be risky.

Keeping receipts consistently is the safest approach, and with Invoice24, it is easier than ever.

Conclusion

So, do sole traders need to keep receipts in the UK? Absolutely. Receipts are a fundamental part of good record keeping, tax compliance, and smart business management. They protect you in the event of HMRC queries, help you claim all allowable expenses, and provide insights into your business finances.

By using a free invoicing and expense management app like Invoice24, you can simplify receipt storage, reduce paperwork, and focus more on growing your business. Instead of seeing receipts as a chore, treat them as a valuable tool that supports your success as a sole trader.