Should Your Business Go Paperless? Benefits of Digital Record-Keeping for UK Companies

byDaniel Greenaway/Published:6th June 2025/inMaking Tax Digital, Running a business, Tax

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As digital solutions continue to transform the way businesses operate, many small business owners are now asking the question: should we go paperless? The answer, for most UK businesses, is increasingly yes.

Going paperless for small business operations means shifting from physical paperwork to digital record-keeping systems. This can include scanning receipts, using cloud accounting software, implementing digital payroll, and storing client data electronically. While the transition can seem daunting, the benefits are substantial.

In this guide, we explore the advantages of going paperless, what it means for compliance with Making Tax Digital (MTD), how it enhances efficiency and security, and practical steps to make the switch.

What Does ‘Going Paperless’ Really Mean?

A paperless business replaces physical paperwork with digital alternatives, reducing the use of printed documents across operations. This includes:

Storing invoices, receipts, contracts and statements electronically
Using cloud-based accounting and payroll systems
Submitting digital tax returns
Managing HR and employee records online
Communicating via email and digital platforms

It does not mean eliminating all paper entirely, but rather minimising reliance on it for day-to-day business tasks.

The key is using technology to improve how your business records, processes, stores and retrieves information.

Why Go Paperless? The Business Case

Here are the main benefits of going paperless for small business owners in the UK:

1. Compliance with Making Tax Digital (MTD)

The most compelling reason for many small businesses to go paperless is to stay compliant with HMRC’s Making Tax Digital (MTD) regulations.

MTD requires businesses to:

Keep digital records of income and expenses
Use compatible software to submit VAT and income tax returns

As of April 2022, MTD for VAT is mandatory for all VAT-registered businesses, regardless of turnover. From April 2026, MTD for Income Tax Self Assessment (ITSA) will also apply to sole traders and landlords earning over £50,000, with those earning over £30,000 following in April 2027.

By going paperless, you ensure your business meets these obligations and avoids penalties.

HMRC – Overview of Making Tax Digital

2. Improved Efficiency and Productivity

Manual paperwork slows things down. By switching to digital systems, you can:

Automate repetitive tasks like invoicing, payroll and data entry
Quickly retrieve documents with search functions
Access records from anywhere via cloud systems
Share files instantly with your accountant or team

Digital systems help streamline workflows, cut admin time and reduce duplication of effort. This frees up more time to focus on value-added activities like sales, strategy and customer service.

3. Better Data Security

Physical documents are vulnerable to theft, fire, flood and human error. Digital systems offer:

Password protection and encryption
Secure cloud backups
Audit trails to monitor access and changes
Controlled access levels for employees

When implemented correctly, digital storage is far more secure than filing cabinets or desk drawers. With cyber-security protocols in place, you can protect sensitive financial data and customer information in line with the UK GDPR.

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4. Cost Savings

Going paperless can reduce business overheads by:

Cutting printing, ink and paper costs
Lowering physical storage needs (e.g. filing cabinets, archive boxes, offsite facilities)
Reducing postage and courier charges
Minimising time spent on manual admin

Although there may be initial investment in software or devices, the long-term savings and efficiencies often outweigh the costs. It also reduces the risk of human error, which can lead to expensive mistakes in financial or compliance matters.

5. Eco-Friendly and Sustainable Business Practice

Environmental concerns are increasingly influencing business decisions. Reducing your paper usage is one way to operate more sustainably.

Benefits include:

Smaller carbon footprint
Less physical waste
Improved reputation with eco-conscious clients and stakeholders

While going paperless alone will not make your business fully green, it is an easy and visible step in the right direction.

6. Scalability and Flexibility

As your business grows, managing paper records becomes increasingly cumbersome. Digital systems can easily scale with your operations, whether you:

Hire more staff
Add new services
Work with remote teams
Expand to multiple locations

You can also access data anytime, anywhere which is useful if you travel for work or operate in different time zones.

7. Faster Collaboration and Remote Working

Digital record-keeping supports modern, flexible working arrangements. Your team can:

Share documents in real time
Access updated information instantly
Avoid version control issues
Collaborate effectively across departments or locations

In a world where hybrid and remote work are increasingly normal, a paperless system gives your team the tools to succeed from anywhere.

How to Start Going Paperless

The transition does not have to be overwhelming. Follow these steps to gradually reduce paper use and improve digital record-keeping:

Step 1: Review Your Current Systems

Identify the areas of your business most dependent on paper (e.g. invoices, payroll, client records)
Consider where delays, duplication or security risks occur

Step 2: Choose Your Digital Tools

Look for cloud-based software that is HMRC-compatible and suits your business size. Popular options include:

Xero – excellent for small to medium businesses
FreeAgent – ideal for freelancers and contractors
QuickBooks – user-friendly and scalable
The Balance App – tailored for UK business owners by Accounting Wise

Also consider:

Document scanners and apps like Adobe Scan or CamScanner
Cloud storage tools such as Google Drive, Dropbox or OneDrive
Digital payroll software and e-signature platforms

Step 3: Digitise and Store Existing Records

Scan and upload key documents
Organise folders by type, date or project
Implement naming conventions and user permissions
Back up regularly and securely

Step 4: Train Staff and Update Policies

Provide training on new tools and processes
Update your data handling and retention policies to reflect digital storage
Communicate clearly about access and compliance requirements

Step 5: Reduce Incoming Paper

Ask suppliers and clients to send documents electronically
Use digital invoices and contracts
Opt out of paper statements and marketing where possible

Going Paperless and HMRC Requirements

HMRC accepts digital documents for tax purposes, provided they are:

Accurate and complete
Readily accessible
Kept for the required retention period (usually 6 years)

Digital records must meet the standards set out by Making Tax Digital. This includes:

Recording transactions as close to real time as possible
Storing them in a functional compatible format
Submitting updates directly to HMRC via authorised software

Failure to comply can result in penalties, especially as MTD expands across income tax and potentially Corporation Tax in the coming years.

Common Concerns and Misconceptions

Is it legally acceptable to store receipts digitally?
Yes. HMRC accepts scanned or photographed copies of receipts and invoices, as long as they are legible and stored securely.

What about cyber security risks?
Cloud platforms often provide higher levels of security than manual filing systems. Implement two-factor authentication, strong passwords and regular backups to stay protected.

Will I lose access to records if my software provider goes under?
Choose reputable providers with data export options and ensure you keep secure backups of critical records.

Is going paperless only for large companies?
Not at all. In fact, small businesses often benefit the most, with lower admin overheads, simplified processes and more time for growth.

Final Thoughts on Going Paperless with your Accounts and Record Keeping

Going paperless for small business operations in the UK is not just a trend, it is fast becoming a necessity. From meeting legal obligations like Making Tax Digital, to saving time, reducing costs and improving security, the advantages are clear.

While the initial switch requires planning and training, the long-term benefits in compliance, productivity and scalability are significant. By adopting digital record-keeping, your business will be better equipped to operate efficiently in a digital-first economy.

Need Help Going Paperless?

At Accounting Wise, we specialise in helping small businesses transition to cloud accounting and digital finance systems. From selecting the right tools to ensuring MTD compliance, we make going paperless simple and stress-free.

Need help understanding your business finances? Get started today for expert advice on improving your profits.

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