How to keep on top of your record keeping
Your business expenses are tax deductible but in order to claim them you must keep your receipts or evidence of the expense. HMRC underlines the need for your record keeping to be accurate, clear and complete.
Ongoing invoices might be easy to keep track, but the smaller expenses can add up. To make sure you keep track of everything, you need to have a couple of processes in place.
Here are some suggestions for how to do that.
A process for physical receipts. A process for digital receipts
First off, you’ll need to set up two processes, one for physical receipts and one for digital receipts. For each of these we suggest you nominate ONE place where you keep them, so you know exactly where to put them and where to find them. How you manage this will depend on whether you use accounting software or not.
Record keeping if you use accounting software
Accounting software like Quickbooks or Xero not only manage your invoicing, but they also help you record your expenses. You need to pay a monthly fee for the software, but that cost is tax deductible.
For physical expenses, you can snap a picture of the receipt and log the cost. When it comes to year end, all your expenses are easily calculated. As with all systems, this requires a degree of discipline.
Either make sure all your work receipts go in one place so they don’t get mixed up with your personal receipts – it could be a section of your wallet or zip file in your work bag. Alternatively, photograph your receipt every time you get one and store it in a receipts folder on your phone.
Then, decide how regularly you’re going to upload your receipts and stick to it. It can be daily, weekly or monthly. HMRC does accept scanned receipts so it’s up to you whether to hold on to them or not. If you do, move the receipt from your wallet to a drawer, box or file that you’ve set aside for this year’s expenses.
For digital expenses, you can similarly upload the emailed receipt to your software and log it. Again, think about having a dedicated folder online to keep all your receipts and move those receipts to a ‘logged receipt’ folder once you’ve logged them.
Record keeping if you don’t have accounting software
Again, you’ll need two processes for digital and non-digital receipts.
For your physical receipts, allocate a box, folder or drawer labelled for this current year’s tax. Make it convenient and easy to use. Clear out your wallet every night, every Friday or every month, but find a regular time to get those receipts into the box.
For your electronic receipts, do the same with an electronic folder and name it for the tax year it relates to.
Moving your records into a spreadsheet
At regular intervals you need to transfer the paper information from your manual and online receipt files onto a spreadsheet so you can add up your costs. Again, you might do this weekly, monthly or even annually. It’s really your choice whether to do a little and often or tackle it less frequently. Once you’ve added everything to your spreadsheet, you can add up your tax-deductible expenses for the year.
I’ve got the box of receipts. I don’t know how to manage it from here
The good news is that you have a record of every expense. But there’s no denying it’s a task to sit and record each expense in order to add it to your tax return. At Your Tax Office, that’s not a problem. We’ll get it all sorted for you and categorised by activity so you can understand the costs in your business.
How long do I need to keep my records?
Once you’ve completed your tax return – and of course, Your Tax Office can manage that for you – you should ensure you keep these receipts in case you’re audited. In general you should keep your receipts for a minimum of 6 years from the tax year they relate to. So an expense incurred on 4/6/25 will relate to the tax year ending 5/4/26 and should be kept until 5/4/32.
At Your Tax Office, we recognise that you got into business to deliver your service or make your product. Managing your accounts is necessary but it can be time consuming and take you away from what you do best. CONTACT US if you want help with any part of your tax return from managing your records to filing your return.
