For many self-employed people, receipts are the one part of running a business that quietly gets ignored. That’s until tax season arrives. Then, you likely have to deal with crumpled paper and half-remembered transactions - both of which add unnecessary stress.
But with Making Tax Digital (MTD), and digital recordkeeping becoming standard, keeping digital records of receipts is no longer optional - it’s essential.
The good news is that with the right approach and tools, it can be one of the easiest habits to pick up.
Why digital receipts matter more than ever
HMRC has been clear. Under the new MTD rules, businesses must keep digital records of income and expenses. This includes supporting evidence such as receipts. They’ve even said that paper records alone won’t be sufficient.
But compliance isn’t the only reason to go digital:
- It’s estimated that avoidable errors in relation to manual recordkeeping cost the Exchequer over £8 billion a year
- Research shows that small businesses using digital accounting software found there was less room for error
- Over 65% of finance and accounting decision-makers (including small business owners) admitted to losing paper receipts before submitting their tax return
Put simply, digital records reduce errors, save time and give you confidence that your figures are correct.
What counts as a digital receipt?
A digital receipt doesn’t have to start digital. HMRC accepts:
- Photos of paper receipts
- Scanned documents
- Email receipts
- App-generated invoices
As long as the image is clear, complete and stored digitally, it counts.
Each receipt should show:
- Supplier name
- Date
- Amount
- VAT (if applicable)
- What the expense was for
A step-by-step guide for keeping digital records
1. Capture receipts immediately
The biggest reason receipts get lost is delay so as soon as the expense happens, use your phone and take a photo. Apps like Coconut even let you upload this picture in seconds and attach it to the transaction - making your life even easier come tax season.
2. Link receipts to bank transactions
Manually matching receipts to transactions is time-consuming and prone to errors. But by using a software with a live bank feed, transactions are imported automatically, receipts can be attached to the correct payment and your records stay consistent. This also creates a clear digital audit trail which is exactly what HMRC is looking for under MTD.
3. Categorise as you go
Why wait until the end of the year to sort your expenses? Instead, get into the habit of categorising your receipts when you upload them. This improves accuracy and speeds up your quarterly updates. Plus, you’ll have real-time insights into your spending. A study of UK micro‑businesses found that sole traders spend almost a third (31%) of their total working time on financial admin tasks. This is time that could be reclaimed by doing it little and often.
4. Store everything in the cloud
HMRC requires most records to be kept for at least six years. By using the cloud for storage, you can be sure your receipts are safe even if you lose your phone or your laptop breaks. Plus, your records are accessible anytime and anywhere - which is especially handy if HMRC ever asks for evidence.
5. Review regularly
MTD is being brought in to encourage better habits such as regular reviews. Even just a quick monthly check can catch missing receipts early, correct miscategorised expenses and avoid last-minute tax stress.
Digital receipts now = less stress later
Even if MTD doesn’t apply to you yet, building digital habits now can improve your account accuracy and give you clearer visibility of your finances. Not just that but it’ll make any future compliance effortless.
What’s more, with Coconut by your side, receipts stop being a chore and start working for you.
