Receipts, mileage and the five-year rule: a sole trader’s record-keeping reset
Photo: Mr Ignavy , CC BY-SA 2.0, via Wikimedia Commons
Every sole trader has a version of the shoebox: a drawer, a carrier bag or an inbox of photographed receipts waiting to become a tax return. The problem is not the volume. It is the absence of a system that can answer a simple question from HMRC: how does this figure support the return?
Record-keeping is a legal requirement, not an administrative preference. For self-assessment, sole traders must keep records for at least five years after the 31 January submission deadline. For the 2026/27 return, filed by 31 January 2028, that means keeping records until at least 31 January 2033. If you are VAT registered, keep records for six years. If HMRC opens an enquiry, keep them until it is closed.
What HMRC expects you to keep
HMRC expects records that explain both sides of the return. On the income side, that means sales invoices, takings records, till rolls, bank paying-in slips, online platform statements and contracts. On the expense side, it means receipts, supplier invoices, mileage logs and home-office calculations. Bank and card statements are useful, but they are supporting evidence rather than a complete record.
From April 2026, sole traders and landlords with qualifying income above £50,000 must use Making Tax Digital for Income Tax, which means digital records and compatible software. Outside MTD, digital copies are still acceptable if they are legible and complete. A photograph of a receipt is a record; a blurry photograph of a receipt is a problem waiting to happen.
The defensible expense test
An expense is allowable if it is incurred wholly and exclusively for the trade. The test is not whether it feels business-like; it is whether there is a business purpose and a record to prove it. A bank statement shows a payment left the account. It does not show why. A receipt or invoice with the supplier, date, amount and description closes that gap.
Common allowable costs include office supplies, software subscriptions, business insurance, professional fees, travel to temporary workplaces and business phone use. Common failures include client entertaining, ordinary commuting, everyday clothing and personal meals. Home-office claims can use HMRC’s flat rate or a reasonable apportionment of actual costs; claiming both is not permitted. Mileage can use the simplified rate of 45p for the first 10,000 business miles and 25p thereafter, but only if you keep a log and do not also claim actual running costs.
Mileage logs and home-office records
A mileage log should record the date, start and end location, purpose and miles. A diary entry made on the day is better than a reconstruction six months later. If you use the simplified mileage rate, keep a record of the cumulative business miles so that the 10,000-mile threshold is clear. If you claim actual running costs instead, keep fuel, insurance, servicing and repair receipts.
For a home office, record the method and the calculation. If you use the flat rate, note the hours worked each month and the relevant band. If you apportion actual costs, keep the household bills and a note of the business percentage. The figure on the return should be traceable to a document, not to a memory.
Bank statements are not enough on their own
A separate business bank account is not a legal requirement for a sole trader, but it is a practical control. If you use a personal account, mark business transactions as they happen and keep the matching receipts. Otherwise, January becomes a reconciliation exercise in which every unidentified payment looks suspicious.
Cash businesses should record takings daily and bank them regularly. A weekly total written on the back of an envelope is weak evidence. A simple spreadsheet or app entry is stronger, and it takes less time than trying to remember later.
How long to keep records
The five-year rule is the minimum. Keep records for at least five years after the 31 January deadline for the relevant return. If you filed late, keep them longer. If HMRC is checking a return, keep everything until the check is closed. Digital copies are acceptable, but back them up. A folder on a laptop that fails is not a record-keeping system.
A weekly routine that prevents January panic
Twenty minutes a week is enough if it is done weekly. Photograph receipts and name the files clearly. Log mileage on the day. Reconcile the bank account and note any unexplained payments. Enter income as it arrives. Once a month, total income and expenses and set aside an estimate for tax. Once a quarter, review the categories and check that nothing personal has slipped into the business column.
The goal is not a perfect archive. It is a trail that a stranger could follow. If HMRC asked you to explain a figure, could you point to the invoice, the bank payment and the business purpose? If the answer is yes, the system is working.
Dealing with the existing shoebox
Set aside two hours and sort the contents by month. Discard anything that is clearly personal. Match receipts to bank statements and mark any gaps. Scan the paper and create a folder structure by tax year. If records are missing, reconstruct the figures from bank statements and keep a note of the assumptions. Do not invent receipts.
A shoebox is not a system, but it is a starting point. The reset is complete when next week’s receipts go straight into the new routine rather than back into the drawer.
