Everyone told to keep £400 in cash at home - with HMRC warning

With digital fraud hitting record highs and banking outages becoming more frequent, many people are reconsidering keeping cash at home. The Bank of England has recently seen an increase in banknotes circulating despite fewer cash transactions, as households build safety nets amid economic uncertainty and recent cyber-attacks on businesses.

Yet most have no idea how much is actually safe to store at home. Fred Harrington, CEO of Proxy Coupons, says he has seen how digital vulnerabilities affect financial habits. Fred said: “The key is finding that sweet spot where you have enough cash to handle a real emergency, but not so much that you're creating bigger problems for yourself. Most people either go overboard or don't think about it at all.”

Having helped countless customers navigate online security concerns, Fred has developed a straightforward approach to emergency cash planning. His recommendations focus on practical amounts that cover real needs without exposing families to unnecessary risks or legal complications.

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The Safe Amount: 3-5 Days of Essential Expenses

So what's the magic number? Fred recommends keeping enough cash to cover 3-5 days of essential expenses. For most families, this translates to roughly £200-£400, depending on household size and local costs.

“Think about what you'd actually need if the power went out for a week or if banking systems went down,” says Fred. “You need petrol money, groceries, maybe cash for a pharmacy or urgent repairs. You're not funding a holiday.”

This amount should cover basics like food, fuel, transportation, and any medications that can't wait. It's enough to handle genuine emergencies without creating a tempting target for thieves or raising red flags with authorities.

What Your Insurance Actually Covers

Here's where many people get a nasty surprise: most standard home contents insurance policies only cover £200-£500 in cash losses. That expensive safe filled with £10,000? You might only get a few hundred back if it's stolen.

Insurance companies treat cash differently from other valuables because it's impossible to prove ownership or track. Unlike jewellery or electronics, cash has no serial numbers or receipts to verify your claim.

“People usually assume their home insurance covers everything equally, but cash gets treated like loose change,” explains Fred. “If you're keeping more than your policy limit, you're essentially self-insuring against loss.”

Where NOT to Hide Your Cash

Harrington warns against the most obvious hiding spots that burglars check first. Skip the mattress, freezer, and jewellery box - these are the first places thieves look. Biscuit tins and book safes might work in films, but they're equally predictable in real life.

Instead, consider less obvious locations that blend into your normal household items. A sealed plastic bag taped inside an old appliance manual, or tucked into a folder of boring paperwork, draws far less attention than traditional hiding spots.

“Burglars spend maybe 10 minutes in your house,” Fred said. “They hit the obvious spots and move on. The goal is to make your cash boring and invisible.”

The Risks of Keeping Too Much

Beyond theft, excessive cash storage creates multiple headaches. Fire and flood don't discriminate - they'll destroy cash just as easily as anything else in your home. Unlike bank deposits, there's no FSCS protection for cash under your floorboards.

Accidents and flooding also pose a particular threat that many overlook. Water damage can make bills unrecognisable, while fire leaves nothing but ash.

“I've seen people lose thousands in house fires because they didn't trust banks,” Fred said. “The irony is they created a bigger risk trying to avoid a smaller one.”

Legal Implications You Should Know

Large amounts of unexplained cash can trigger questions from law enforcement or HMRC. While there's no specific limit on home cash storage, amounts over £10,000 may require documentation during investigations or audits.

If you can't explain where the money came from or why you're keeping it at home, it could be seized under the Proceeds of Crime Act. This is particularly important for small business owners who might be tempted to store cash receipts at home.

“The government doesn't care if you prefer cash, but they do care if you can't explain where it came from,” warns Harrington. “Keep receipts and records for any significant amounts you store at home.”

Fred said: “The goal isn't to become a doomsday prepper or live in fear of digital systems. It's about having a reasonable backup plan that doesn't create more problems than it solves. Most people need far less cash at home than they think - enough to buy groceries and petrol for a few days, not enough to fund a month-long holiday.

“I always tell people to think of home cash storage like a fire extinguisher. You hope you never need it, but when you do, you want it to work without causing additional damage. The sweet spot is usually a few hundred pounds - enough to handle real emergencies, small enough that losing it won't ruin you financially.

“Remember, when people keep large amounts of cash at home, they tend to dip into it for non-emergencies, defeating the whole purpose. Keep it simple, keep it secure, and keep it truly reserved for emergencies.”