A field guide for UK businesses

Your receipts are fading. Your duty to keep them isn't.

HMRC expects you to hold business records for five or six years. Thermal till receipts can be blank in a fraction of that. Here's what the rules ask of you, and how Xero's Smart Document Capture keeps every record readable for as long as you need it.

HARBOUR HARDWARE

VAT No. GB 123 4567 89

Timber 2x4 ×6£38.40

Screws 5x60£7.95

Sealant£11.20

VAT @20%£9.59

TOTAL£57.55

Example receipt · thermal paper

The rules

Three clocks, one shoebox

How long you keep records depends on how you trade. HMRC can ask to see them at any point in that window, and you must be able to produce them.

5 yrsSole traders & partnershipsAfter the 31 January Self Assessment deadline for the tax year.

6 yrsLimited companiesFrom the end of the company financial year the records relate to.

6 yrsVAT records10 years if you use the VAT One Stop Shop scheme.

Try it

When can you shred it?

Tax year the records relate to

Keep until at least

—

Period endsShred date

Keep records longer if HMRC opens a check, a transaction spans more than one period, or the records cover a long-life asset. If a tax return goes in more than 4 years late, keep records for 15 months after you send it.

The checklist

What counts as a "record"

Sales invoices and records of all takings, including cash and till rolls
Purchase invoices and receipts for every business expense
Bank statements, paying-in slips and cheque stubs
VAT invoices issued and received, including cancelled ones
Payroll records: pay, deductions, tax codes and benefits
Asset purchases and disposals, plus mileage logs for business journeys
For companies: details of directors, shareholders and the PSC register
Money you pay into or draw out of the business

Good news: paper isn't required

HMRC accepts digital records, including photos and scans of paper receipts, as long as the copy is complete, legible and you can produce it on request. Under Making Tax Digital for VAT, some records already must be kept digitally in compatible software, with digital links between any tools you use.

What's changed in 2026

Making Tax Digital reaches Income Tax

Sole traders and landlords with qualifying income over the threshold must keep digital records and send quarterly updates through compatible software. The threshold is based on income two tax years earlier.

6 April 2026 · live now£50,000+First quarterly update was due 7 August 2026

6 April 2027£30,000+Penalty points apply to everyone from this date

6 April 2028£20,000+Based on 2026/27 income

£3,000

The maximum penalty HMRC can charge for each failure to keep or preserve adequate records for a return. Under MTD this also covers failing to keep digital records or breaking the digital links in your software. HMRC weighs how serious the failure is and can reduce it.

Quick quiz

Myth or fact?

Score: 0 of 6 answered

The fix

Meet Smart Document Capture

Smart Document Capture is Xero's built-in tool for reading receipts, bills and invoices. It lives in Documents (the area Xero used to call Files), is powered by Xero's AI assistant JAX, and is included on all Xero small business plans.

SnapPhotograph itUse the Xero Accounting app on your phone at the till, before the ink fades.

ForwardEmail itSend e-receipts and supplier PDFs to your own Xero forwarding address.

UploadDrop it inAdd scans, PDFs or images straight into Documents on the web.

Watch a receipt become a record

CORNER CAFÉ

VAT No. GB 987 6543 21

14/10/202611:42

Client lunch ×2£36.00

VAT @20%£6.00

TOTAL£36.00

Card ending 4421

Supplier

Date

Total

VAT

Account

Example only. You still review the supplier, date, totals and VAT treatment before it goes into your books. Client entertaining usually carries no VAT recovery, which is exactly the kind of call a human makes.

Why it matters for HMRC

How it ticks the record-keeping boxes

The shoebox

Thermal receipts fade long before the 5–6 year deadline
Lost, damp or binned paper means a missing record
Typing up a year's receipts at once misses MTD's quarterly rhythm
Finding one receipt for an HMRC query means a long search
Keying errors creep into totals and VAT

Xero with Smart Document Capture

A legible digital copy stored in the cloud for the full retention period
Each image sits next to its transaction, so evidence is one click away
Extracts supplier, date, totals and line items, and suggests a match to the bank feed
Learns your patterns, so suggestions improve over time
Warns you before you delete a document linked to a transaction
Records stay current through the year, ready for quarterly updates

Your numbers

How much time is the shoebox costing you?

Receipts and bills per month

Minutes each, filed and typed by hand

Minutes each, snapped and reviewed

16hours a year back, on your own estimates

These figures are yours to adjust; they aren't Xero's claims. Time saved varies with how clean your documents are and how many need correcting.

General information as at October 2026, not tax advice. Rules can change, and your circumstances matter: speak to your accountant before destroying any records. Need help with record-keeping or Xero? Talk to AHB Finance.

Sources