The record system that makes deductions survive scrutiny
What a defensible expense record looks like in the US and the UK: contemporaneous notes, receipts, apportionment, mileage logs, and how long to keep it all.
An undocumented deduction is not a deduction. It is a position you cannot support, and if it is challenged the cost is the tax you did not pay, plus interest running from the original due date, plus whatever penalty attaches.
That is the whole argument. Everything below is about the mechanics of not being in that position, in both the US and the UK, because the retention rules differ by more than two years and most freelancers with clients on both sides of the Atlantic are working from the wrong one. This is general information about how the record rules work, not advice on your return.
The record has to exist before anyone asks for it
The IRS calls this timely-kept records. Publication 463 puts it plainly: records should be "prepared at or near the time of the expense." Documentary evidence such as receipts, paid bills or statements "generally constitutes the most credible proof of an expense," but the note explaining why the expense was business has to be written while you still remember.
The practical difference is enormous and it is not about neatness. A one-line note typed into your phone on the day, saying who you met and what the work was, is stronger evidence than a beautifully formatted spreadsheet built in March from bank statements. The spreadsheet is a reconstruction. Everyone involved knows it is a reconstruction.
The UK now enforces the same principle through software rather than through argument. Under Making Tax Digital for Income Tax, live since 6 April 2026 for anyone with qualifying income above £50,000, you record the amount, the date and the category of each transaction digitally, and those records must exist before the quarterly update deadline for the period they fall in. HMRC's own wording is that you "should create digital records as close to the date of the transaction as possible."
One thing MTD does not require, and this trips people: the original receipts do not have to be digital. HMRC still expects you to keep the underlying documents, in paper or as copies, alongside the digital transaction records.
A receipt proves the amount. It never proves the purpose
For travel, car and gift expenses, Publication 463 asks for a set of elements, not a document: the amount, the time, the place, the business purpose, and where relevant the business relationship of the people involved. A card slip gives you two of those. It cannot give you the last two, and the last two are where deductions actually fail.
Element | What normally proves it | Where it goes missing |
|---|---|---|
Amount | Receipt, invoice, card statement | Split bills, tips added later |
Time | Receipt date, bank feed date | Charges that post days after the event |
Place | Merchant name on the receipt | Online purchases with no location |
Business purpose | A note you wrote | Almost always. This is the gap |
Business relationship | A note naming the person and the client | Almost always |
There is a threshold that gets misread as permission to keep nothing. Publication 463: "You don't need written evidence if the amount is $75 or less, except for lodging expenses." That removes the requirement for the paper, not the requirement for the record. Every element in the table above still has to be provable. Lodging needs the receipt regardless of amount.
The fix is a convention, not a system. Every expense gets a purpose string attached at the moment of capture. Client or project, then what it was for, in under ten words.
Mixed use is where the money is and where the proof isn't
The expenses that matter most to a freelancer are the ones that are partly personal: the phone, the home internet, the laptop, the car, the room. Both jurisdictions allow apportionment, and both put the burden of establishing the split on you.
The UK test is wholly and exclusively, section 34 ITTOIA 2005. HMRC's guidance in BIM37007 draws the line clearly: an expense with a genuine dual purpose is disallowed outright, but where "a definite part or proportion of an expense has been laid out or expended wholly and exclusively for the purposes of the trade," that part can be claimed. The manual also accepts a workable method for establishing the proportion, which is a statistical review over a representative period, applied consistently until circumstances change.
That is the procedure, and it is worth running deliberately. Pick two typical weeks. Log the split for the item in question — call logs, data usage, mileage, hours the room is in use. Write down the resulting percentage, the dates of the sample, and the method. Reuse that percentage until something material changes, and re-sample when it does. The US equivalent for vehicles is the same idea: Publication 463 permits sampling to substantiate vehicle expenses where you keep adequate records for a representative sample period.
Two specific traps. The UK working-from-home flat rate excludes phone and internet, so those still need an apportionment basis of their own. And in the US the home office has no apportionment at all under the exclusive use test: a room used for both business and personal purposes does not partly qualify, it fails. The four headline deductions and their thresholds are set out in the 2026 deduction figures post.
The mileage log is the deduction, in both countries
Publication 463 asks a vehicle log to carry the date of the trip, the miles driven, the destination or business purpose, and the business relationship where one applies. A monthly total written from memory satisfies none of that, which is what makes mileage the easiest line to knock out: the required elements are enumerated, so either they are on the page or they are not.
The UK version has an extra decision baked in. If you use simplified expenses for a vehicle (55p a mile for the first 10,000 business miles from 6 April 2026, then 25p, and 24p for motorcycles), you must keep using flat rates for that vehicle for as long as it is in the business. You are choosing a method for the life of the car, on the basis of a number you may not yet be recording accurately. Log first, choose second.
How long you keep it is a jurisdiction question, and the gap is two years
US | UK | |
|---|---|---|
Default | 3 years from filing | 5 years after the 31 January submission deadline |
Under-reported income | 6 years if you omit more than 25% of gross income | Longer if HMRC opens an enquiry |
No return, or a fraudulent one | Indefinitely | Enquiry window stays open |
Very late filing | n/a | 15 months after you file, if more than 4 years late |
Employment tax records | 4 years after the tax is due or paid | Separate PAYE rules apply |
The UK also attaches a penalty to the failure itself, independent of any tax at stake: under section 12B(5) of the Taxes Management Act 1970, a person who fails to keep and preserve records is "liable to a penalty not exceeding £3,000." That is a charge for not having the paperwork, whether or not the return was right.
If you file in both places, keep everything for the longer period. A US-shaped three-year retention habit leaves a UK sole trader short by more than two years on every year of records.
Where freelancers have the expense but not the proof
These are the categories that survive the year and die at the desk.
Subscriptions on a personal card. The charge is real and deductible, but it sits in a personal statement you will not want to hand over, mixed with everything else. Move every recurring business subscription to one card and stop the problem at source. Card and spend tooling built for a company issuing cards to staff solves a different problem from the one you have, which is the distinction the Pleo alternative page draws.
Client meals and travel. The receipt survives, the reason does not. Six months later "Lunch, £48" is a number with no business purpose attached, and purpose is a required element.
Home internet and phone. Usually claimed at a round percentage nobody can explain. A documented two-week sample turns a guess into a method.
Equipment bought part-personal. A laptop used for work and for everything else needs a defensible business proportion, recorded at purchase rather than at filing.
Cash paid to subcontractors. No invoice, no bank trail, no deduction — and in the US the 1099-NEC threshold rose to $2,000 for payments made after 31 December 2025 under Pub. L. 119-21 §70433, so the paper that used to arrive automatically often will not.
Foreign-currency spend. The exchange rate on the transaction date is part of the record. Captured a year later from a rate site, it is an estimate.
Your own records are now the only records
That last point deserves its own section. In the US the 1099-NEC and 1099-MISC reporting threshold moved from $600 to $2,000, and the 1099-K threshold reverted to more than $20,000 and more than 200 transactions, both under Pub. L. 119-21. Neither change makes a dollar of income less taxable. What they change is how much of your income arrives with a matching form. Below those thresholds, nothing arrives, and the only record of that revenue is yours. The mechanics of both forms are in the 1099 threshold post.
So the income side of your records now carries the same evidential weight as the expense side. Every invoice you issue is part of the file you may need years later, which is a reason to generate them somewhere durable rather than in a word processor. The browser-based invoice generator produces a numbered PDF with no signup, and whatever you use should give you a consistent numbering sequence you can reconcile against bank deposits.
The monthly close, in fifteen minutes
Copy this. It is deliberately short, because a close that takes an hour gets skipped in the month you are busiest, which is the month with the most transactions.
MONTHLY CLOSE - same day each month[ ] Every business transaction has a receipt or invoice attached-> the missing ones are usually the cash ones; chase them now[ ] Every entry has a purpose string: client / project / what for-> under 10 words, written now, not at filing[ ] Mileage log totalled for the month, trip by trip-> date, miles, destination, purpose[ ] Personal-card business charges listed and flagged[ ] Foreign-currency items carry the rate used and its date[ ] Invoices issued this month reconciled to deposits received-> gaps here are either unbilled work or unrecorded income[ ] Apportionment percentages still current-> re-sample if the phone, the room or the car changed
Two notes on tooling, because this is where software genuinely helps rather than merely charging. Matching receipts to bank lines automatically closes the gap between a charge and its evidence, which is the gap that opens fastest; in Worklyn that lives on Pro and above alongside bank feeds. And an expense tool built around your own money behaves differently from one built for employees filing claims against a company, which is the distinction behind an Expensify alternative for your own money rather than an expense queue.
What to change this week
Pick a fixed day of the month for the close and put it in the calendar as a recurring block. The date matters more than the length.
Run one two-week sample for your largest mixed-use expense, write down the percentage with the sample dates and the method, and file the note where your return gets prepared.
Check your retention period against the table above and set a deletion date on the oldest folder you have, rather than keeping everything forever or clearing it out early. If you also want the deadlines and the set-aside side of this, the year-round tax system post covers both jurisdictions.
Worklyn matches receipts to bank-feed lines so the charge and the evidence stay attached, and the invoices you issue sit in the same workspace rather than in a separate app, which means the income side and the expense side of the record are reconciled in one place.