HMRC Digital Record Keeping Requirements: UK Business Guide

UK businesses must retain financial records for at least 5 years (self-employed and partnerships) or 6 years (limited companies and VAT-registered businesses) under HMRC rules. HMRC accepts scanned and digital copies of invoices and receipts as valid alternatives to paper originals, provided the copies are complete, legible, and capture all information from the original documents.

UK record keeping obligations come from multiple overlapping sources: HMRC tax rules, VAT legislation, the Companies Act 2006, and Making Tax Digital requirements. A sole trader registered for VAT, for example, must satisfy both Self Assessment retention rules and VAT-specific record keeping requirements simultaneously. This guide brings all four frameworks together, covering retention periods by business type, Companies Act obligations for limited companies, HMRC's rules for digital and scanned records, MTD's digital requirements, and the penalties for non-compliance.

How long must you actually keep records? The answer varies by business structure, tax registration, and record type.

---

How Long Must UK Businesses Keep Financial Records?

The answer depends on your business structure, the type of record, and which regulatory framework applies. The table below consolidates retention periods across HMRC tax rules, VAT legislation, and the Companies Act 2006 into a single reference.

Business Type / Record Category	Minimum Retention Period	Authority
Self-employed / partnership tax records	5 years after the 31 January Self Assessment deadline for the relevant tax year	HMRC
Limited company accounting records	6 years from the end of the financial year they relate to	Companies Act 2006, s.388
VAT records and invoices	6 years from the date of the transaction	HMRC / VAT Notice 700/21
VAT MOSS / cross-border digital services	10 years from 31 December of the year the transaction took place	HMRC
Company formation documents (certificate of incorporation, memorandum and articles)	Lifetime of the company	Companies Act 2006
Board and shareholder meeting minutes	10 years from the date of the meeting	Companies Act 2006, s.355
Private company accounting records (Companies Act minimum)	3 years from the date the records are made	Companies Act 2006, s.388(3)
Capital asset records (plant, equipment, property)	6 years after the date of disposal	HMRC
PAYE and payroll records	3 years after the end of the tax year they relate to	HMRC

For most UK businesses, 6 years is the practical safe default. This single period satisfies both HMRC requirements and Companies Act obligations for limited companies, removing the need to track different deadlines for different record types. Sole traders without VAT registration can reduce their general tax record retention to 5 years after the relevant Self Assessment deadline, but any sole trader registered for VAT should still retain VAT records for 6 years to comply with VAT Notice 700/21.

These periods assume no open HMRC enquiry. Where HMRC suspects fraud or deliberate tax evasion, there is no upper time limit on how far back an investigation can reach. In practice, HMRC can and does request records going back 20 years in serious fraud cases. Retaining records beyond the statutory minimum provides a safety margin, particularly for businesses with complex transactions or international dealings. For businesses that operate across borders, invoice retention requirements across different countries vary significantly, so UK-based rules should not be assumed to cover obligations in other jurisdictions.

Limited companies face additional obligations under the Companies Act 2006, which creates its own retention and storage requirements beyond HMRC's rules.

---

Companies Act 2006: What Limited Companies Must Keep

HMRC tax obligations are only half the picture for limited companies. The Companies Act 2006 creates an entirely separate set of record keeping requirements, enforced by Companies House rather than HMRC. A company can be fully compliant with its Self Assessment or Corporation Tax obligations and still breach the Companies Act if its corporate records fall short.

Understanding where these two regimes overlap and where they diverge is essential for directors and their advisors.

What the Companies Act Requires

Under Section 386 of the Companies Act 2006, every limited company must keep accounting records that are sufficient to:

• Show and explain the company's transactions on an ongoing basis
• Disclose with reasonable accuracy the financial position of the company at any time, enabling directors to confirm the company meets its obligations
• Enable the directors to prepare accounts that comply with the Act's requirements

In practice, this means a limited company cannot rely on bank statements alone. It must maintain separate records of what each transaction relates to: purchase invoices, sales invoices, expense receipts, and asset records. Entries must also be made within a reasonable timeframe after the transactions they relate to, not retrospectively assembled at year end.

Retention Periods: Companies Act vs HMRC

The Companies Act sets a 3-year minimum retention period for private limited companies and 6 years for public companies. On the surface, the 3-year rule appears more lenient than HMRC's standard 5- or 6-year requirements, and in practice it largely is. Because HMRC's longer retention window applies to the same underlying financial records, most documents must be kept for at least 5 years regardless of the Companies Act minimum.

However, this distinction is not purely academic. Certain records fall under the Companies Act but sit outside HMRC's scope: board minutes, resolutions, directors' service contracts, and other corporate governance documents. For these records, the 3-year minimum is the operative retention period unless internal policy or professional best practice dictates otherwise.

Where Records Must Be Kept

Companies Act records must be kept at the company's registered office or at a place the directors have notified to Companies House, known as the SAIL (Single Alternative Inspection Location) address. This requirement exists so that records are accessible for inspection if needed.

Electronic records are permitted under the Act, provided they can be reproduced in hard copy form. There is no requirement to maintain paper originals alongside digital versions, but the ability to produce a legible paper copy on demand is a condition of compliant electronic storage.

While this guide covers how long and in what form records must be kept, what must appear on a UK VAT invoice is separately regulated by HMRC's VAT rules. Beyond retention and content, the practical question most businesses face is whether they can replace paper originals with digital copies.

---

Does HMRC Accept Scanned and Digital Records?

Yes, HMRC accepts digital records, including scanned and photographed copies of paper documents. UK businesses do not need to retain hard copy originals provided their electronic records are complete and accurate. This is a straightforward policy, but it comes with specific conditions that must be met.

HMRC's conditions for accepting digital copies in place of paper originals are:

• The digital copy must be clear and legible at the point of capture and remain so throughout the retention period
• It must capture all information from the original document, with no cropping, compression, or formatting that causes data loss
• Both sides of the document must be scanned if there is information on both sides, such as terms and conditions that affect a transaction's VAT treatment
• Records must be readily locatable and producible on request from HMRC, meaning they need to be organised in a way that allows retrieval without unreasonable delay

These conditions, referenced in VAT Notice 700/21, apply to invoices, receipts, credit notes, and other source documents that businesses routinely handle in high volumes.

There is one critical exception. Documents containing non-VAT tax information, such as bank interest certificates, dividend vouchers, and P60 forms, must be kept in their original form. This requirement is frequently overlooked by businesses that assume a blanket digitisation policy covers everything. If an HMRC inquiry reveals that original-only documents were destroyed after scanning, the business may face challenges substantiating claims or allowances tied to those records.

For the vast majority of day-to-day financial documents, however, UK businesses can safely discard paper originals after digitising them. Invoices, purchase receipts, expense records, and bank statements all qualify for digital-only retention, provided the four conditions above are satisfied. This means scanning invoices to meet HMRC requirements is a viable and increasingly standard practice for digital record keeping across UK businesses of all sizes.

The UK's regulatory approach to digital records continues to evolve. Developments in e-invoicing standards are on the horizon, with the UK's upcoming e-invoicing mandate expected to further shape how businesses create and store transaction records digitally.

HMRC's acceptance of scanned documents is a records storage policy, separate from Making Tax Digital, which imposes its own digital record keeping requirements and software obligations.

---

Making Tax Digital and Digital Record Keeping

A critical distinction separates Making Tax Digital from HMRC's general acceptance of scanned documents, and conflating the two is one of the most common compliance misunderstandings among UK businesses. Making Tax Digital requires businesses to keep digital transaction records: income, expenses, and VAT transactions recorded in MTD-compatible software. It does not require businesses to scan paper invoices or receipts. These are two entirely separate HMRC policies with different legal bases and different practical implications.

MTD Timeline and Who It Affects

The rollout of Making Tax Digital record keeping follows a phased schedule:

• From April 2022: All VAT-registered businesses, regardless of turnover, must maintain digital VAT records and submit VAT returns through MTD-compatible software. Quarterly submissions must be generated from digital records with digital links between software programs. Manual re-keying of data between systems does not satisfy the requirement.
• From April 2026: Self-employed individuals and landlords with annual business or property income exceeding £50,000 must keep digital income tax records under MTD for Income Tax Self Assessment (MTD ITSA). Quarterly updates to HMRC will replace the current annual Self Assessment return for those within scope. Full details on Making Tax Digital for Income Tax requirements from April 2026 are available for businesses preparing for this deadline.

Why This Distinction Matters in Practice

The practical consequences of separating these two policies are significant. A business can be fully MTD-compliant by entering transaction data into accounting software while keeping every paper invoice and receipt in a physical filing cabinet. The software satisfies MTD; the filing cabinet satisfies HMRC's general record keeping obligations. Nothing in the MTD regulations requires those paper documents to be scanned or digitised.

Conversely, a business that scans every single invoice into a cloud storage system but does not use MTD-compatible software to record and submit its VAT or income tax data is not MTD-compliant. Scanning serves HMRC's broader acceptance of digital records as substitutes for originals. MTD serves the separate goal of reducing errors in tax reporting through structured digital data entry and submission.

The Practical Case for Full Digitisation

While MTD does not mandate scanning source documents, the combination of MTD's digital transaction requirements and HMRC's acceptance of scanned records creates a strong practical incentive to digitise everything. Businesses already using digital accounting software for MTD compliance gain additional efficiency by also digitising their invoices, receipts, and bank statements. Matching a scanned invoice to a digital transaction record inside the same software environment is faster and more reliable than cross-referencing a screen with a paper file.

The broader case for digital record keeping is reflected in government projections. A National Audit Office review of Making Tax Digital found that HMRC estimates the programme could raise £3.9 billion in additional tax revenue by reducing taxpayer errors through mandatory digital record keeping.

---

Penalties for Failing to Keep Business Records in the UK

UK businesses face penalties from two distinct legal frameworks when records fall short of requirements, and the consequences extend well beyond a simple fine.

HMRC penalties apply to all businesses subject to tax record keeping obligations. HMRC can impose a penalty of up to £3,000 for each failure to keep or preserve adequate records. These penalties most commonly arise when HMRC opens a compliance enquiry into a tax return and determines that the underlying records are insufficient to support the figures reported. The penalty is per failure, meaning multiple inadequacies across different tax years or record categories can compound quickly.

Companies Act 2006 penalties carry far greater severity for directors of limited companies. Under section 389 of the Companies Act 2006, directors who fail to comply with statutory record keeping requirements commit a criminal offence. Conviction can result in an unlimited fine, up to 2 years' imprisonment, or both. Unlike HMRC's financial penalties, this is a criminal sanction that appears on a director's record and can affect their ability to serve as a company officer in the future.

The indirect consequences of poor record keeping can prove equally damaging. Inadequate records increase the likelihood of inaccurate tax returns, which in turn can trigger:

• Additional tax assessments where HMRC estimates the tax due, often unfavourably
• Interest charges on any underpaid tax, accruing from the original due date
• Further penalties for errors, calculated as a percentage of the additional tax owed, with rates increasing where HMRC determines the error resulted from carelessness or deliberate behaviour

There is a critical practical dimension that every UK business owner and director should understand: in any tax enquiry, the burden falls on the taxpayer to demonstrate that their return is correct. HMRC does not need to prove your figures are wrong. You need to prove they are right. Adequate, well-organised records are the primary evidence in that process. Without them, you are negotiating from a position of weakness, and HMRC has broad powers to issue estimated assessments that may significantly exceed your actual liability.

---

Practical Steps for UK Record Keeping Compliance

The regulatory frameworks covered in this guide overlap in places and diverge in others. The following steps bring them together into a single compliance action plan.

1. Identify which frameworks apply to your business. A sole trader operating below the VAT threshold needs to satisfy HMRC Self Assessment rules only. A VAT-registered sole trader adds VAT-specific record keeping obligations on top. Limited companies face both HMRC requirements and Companies Act 2006 obligations regardless of size. From April 2026, self-employed individuals and landlords with gross income over £50,000 must also comply with Making Tax Digital for Income Tax Self Assessment, adding quarterly digital reporting to the mix. Mapping your obligations first prevents both gaps and unnecessary effort.

2. Apply the 6-year default retention period. For the majority of UK businesses, retaining all financial records for 6 years from the end of the relevant financial year satisfies both HMRC and Companies Act requirements simultaneously. Sole traders who are not VAT-registered may reduce to 5 years for income tax and Self Assessment records only, but the 6-year standard is simpler to administer and eliminates the risk of destroying records prematurely.

3. Digitise with HMRC's conditions in mind. If you scan paper invoices, receipts, or other source documents, every digital copy must be clear, legible, and capture all information present on the original. Scan both sides of any document where relevant information appears on the reverse. Retain the original paper versions of bank interest certificates and dividend vouchers, as HMRC does not accept scanned substitutes for these specific document types. For everything else, properly scanned copies allow you to dispose of the paper originals.

4. Separate MTD compliance from document digitisation. These are two distinct activities that are often conflated. MTD requires that transaction-level data (amounts, dates, categories) is recorded and preserved digitally within compatible accounting software. Scanning paper invoices and receipts into digital format is a separate practice. It is strongly recommended for accessibility and disaster recovery, but it does not satisfy MTD's digital record keeping requirements on its own, and MTD does not require it.

5. Store records so they are readily accessible. HMRC can request records at any point during an enquiry, and delays in producing them can escalate penalties. Ensure your filing system, whether physical or digital, allows you to locate specific documents without extended searching. Limited companies must keep accounting records at their registered office or a notified SAIL (Single Alternative Inspection Location) address, and those records must be reproducible in hard copy form on request.

6. Review retention periods annually. Retention clocks start from different points depending on the framework and document type. HMRC's 5-year Self Assessment clock runs from the 31 January filing deadline. The Companies Act 3-year minimum runs from the date a record is made. Capital asset records must be kept for 6 years after disposal, not purchase. Conduct a scheduled annual review to identify records that have passed their minimum retention period across all applicable frameworks, rather than relying on memory or ad hoc purges.

As UK tax administration continues its shift toward digital-first processes, maintaining well-organised digital records provides both compliance assurance and operational efficiency. For businesses beginning this transition, tools for digitising invoices and financial records can reduce the manual effort involved in scanning, categorising, and storing paper documents to meet HMRC digital record keeping requirements.