Do You Still Need to Keep Business Expense Receipts in 2025?

The way businesses handle expense receipts has fundamentally changed over the past few years. Digital transformation, evolving HMRC requirements, and modern accounting software have reshaped what receipt management actually looks like in practice.

Many business owners are still operating under outdated assumptions about what they need to keep, how they need to store it, and what they need to submit to HMRC. This confusion often leads to either excessive administrative burden or compliance gaps that could prove costly during an inspection.

Here's everything you need to know about receipt requirements in 2025, from basic compliance through to building systems that actually add value to your business.

What are Business Expenses and Deductions?

A business expense is any cost your business incurs that HMRC allows you to deduct from your profits before calculating your tax bill. The critical word here is "allowable" because not every expense qualifies, and HMRC has specific rules about what counts.

The fundamental principle is that expenses must be "wholly and exclusively" for business purposes. This means the expense must be entirely for business use, not personal use. If an expense has both business and personal elements, only the business portion can be claimed.

What Generally Qualifies as Allowable Expenses

• Office costs: rent, heating, electricity, internet connections
• Business travel (excluding regular commuting to your main workplace)
• Staff costs: salaries, contractor payments, training
• Professional services: accountancy, legal advice, consultancy
• Business insurance and banking fees
• Equipment purchases and office supplies

Capital expenses work differently from day-to-day running costs. When you buy equipment, furniture, or anything else your business will use for more than a year, these are treated as capital allowances rather than immediate expenses. You can usually claim these as Annual Investment Allowance or through writing down allowances over several years.

Digital Receipt Management in 2025

HMRC doesn't require physical paper receipts anymore, which is a massive relief for modern businesses. You can scan receipts, photograph them, or store them digitally through accounting software.

Essential Information Your Digital Receipts Must Include

When photographing receipts, ensure the image is clear and legible. Poor quality photos that can't be read won't satisfy HMRC's requirements. Take the photo immediately after receiving the receipt while the paper is still in good condition, as thermal printer receipts fade quickly over time.

Digital storage offers significant advantages: you can search for specific transactions instantly, receipts can't be physically lost or damaged, and you can access them from anywhere with cloud-based systems. Most modern accounting software includes mobile apps that let you photograph and categorise receipts immediately.

What You Need to Submit to HMRC

Here's something that confuses many business owners: you don't submit receipts with your tax return. HMRC doesn't want to see them unless they specifically ask during an inspection or inquiry.

Your tax return contains summary figures for different categories of expenses. The receipts serve as evidence to support these figures if HMRC decides to examine your return more closely. This is why accurate record-keeping is essential even though you're not submitting the actual receipts.

The legal requirement to keep receipts exists for two main reasons. First, HMRC can request to see your receipts during an inspection to verify you're paying the correct amount of tax. Second, proper records make completing your tax return more accurate and help ensure you claim all legitimate expenses you're entitled to.

Record Retention Requirements

The standard requirement is to keep business records for at least five years after the January 31st deadline for the relevant tax year.

Retention Timeline Example

For the 2025-26 tax year (April 6, 2025 to April 5, 2026):

• Tax return deadline: January 31, 2027
• Records must be kept until: February 2032

Different types of records have varying requirements:

• VAT records: 6 years
• Payroll records: 3 years after the end of the tax year
• Capital asset records: As long as you own the asset + 6 years after disposal

These aren't arbitrary timeframes. They reflect HMRC's limits for opening inquiries and investigations. While most inquiries happen within a year or two of filing, HMRC can go back further in cases of suspected fraud or deliberate concealment.

Dealing with Lost or Missing Receipts

Losing the occasional receipt isn't catastrophic, but you need alternative evidence to support your expense claims. For small amounts, HMRC might accept bank statements, credit card statements, or diary entries that clearly show the business purpose.

Steps to Take When Receipts Go Missing

1. Check your digital records - Many suppliers send email confirmations
2. Contact the supplier - Request a duplicate receipt or invoice
3. Gather supporting evidence - Bank statements, delivery confirmations, diary entries
4. Document the business purpose - Write a brief explanation of why the expense was necessary

For larger amounts or regular suppliers, most reputable businesses maintain their own records and can provide copies, though they might charge a small administrative fee.

Building Efficient Receipt Management Systems

Successful receipt management starts with immediate action. The longer you leave receipts unprocessed, the more likely you are to lose them or forget what they were for.

Digital-First Best Practices

Immediate Capture

• Photograph receipts the moment you receive them
• Use accounting software with mobile receipt capture
• Set up automatic bank feed connections

Consistent Organisation

• Create naming conventions for digital files
• Categorise expenses as you process them
• Set up monthly reconciliation routines

Example file naming: 2025-03-15_Amazon_Office-Supplies_£127.50

Regular reconciliation prevents small problems becoming major headaches. Set aside time monthly to ensure all receipts match your bank statements and that expenses are properly categorised. This monthly discipline is far more manageable than trying to sort everything annually.

The Hidden Costs of Poor Receipt Management

Inadequate receipt management carries multiple financial penalties beyond just missing out on legitimate tax deductions.

What Poor Records Cost You

• Higher tax bills - Missing legitimate deductions
• Increased professional fees - Accountants reconstructing incomplete records
• Poor business decisions - Lack of clear spending visibility
• HMRC investigation stress - Can't quickly provide supporting evidence
• Cash flow problems - No real-time expense monitoring

Many business owners are surprised to discover how much they're actually spending in certain categories when they finally organise their records properly.

Specific Receipt Requirements by Business Area

Office and Premises Costs

Keep receipts for rent payments, utility bills, internet and phone costs, office supplies, cleaning and maintenance, and business rates. If you work from home, maintain clear records that separate business use from personal use. HMRC allows simplified calculations for home office expenses, but detailed records give you more flexibility.

Travel and Transport

Business travel receipts are essential, but remember that regular commuting between your home and main workplace isn't allowable. Keep receipts for client visits, business meetings, training courses, conferences, and temporary workplace travel.

For vehicle expenses, you can either:

• Claim actual costs - Requires full records of business mileage and all vehicle expenses
• Use simplified mileage rates - Currently 45p per mile for first 10,000 miles, 25p thereafter

Professional Services and Staff Costs

Maintain receipts for accountancy fees, legal advice, business consultancy, professional memberships, software licenses, employee salaries, contractor payments, and training expenses. For contractors, ensure you have proper contracts demonstrating genuine self-employment to avoid IR35 complications.

Moving Beyond Basic Compliance

This strategic approach to financial data transforms receipt management from a necessary evil into a valuable business tool that supports growth and profitability optimisation. 

Overall, the question isn't whether you can manage receipts yourself, but whether spending your valuable time on administrative tasks is the best use of your expertise.

At Sidekick, we implement integrated systems that capture receipts automatically, categorise expenses intelligently, provide real-time financial visibility, and ensure complete HMRC compliance. More importantly, we use this financial data to help you make better strategic decisions about where to invest and where to save.

Most successful agency owners find that outsourcing financial management frees them to focus on what they do best while actually improving their financial position through better systems and strategic insights.

Book a consultation call to discover how proper financial systems can accelerate your agency's growth.