Blog · 8 November 2026

MTD digital records: what counts, what doesn't, and how long to keep them

Yesterday, 7 November, was the second quarterly update deadline of 2026/27 — and every figure in that update came from digital records. That is the whole foundation of Making Tax Digital for Income Tax: before any deadline, before any software sends anything to HMRC, you must keep a digital record of every business transaction. The good news is that a digital record is a small thing. HMRC asks for three facts per transaction, kept in software that works with MTD. The confusion comes from everything people assume is also required — scanned receipts, bank connections, detailed narratives — most of which is not.

The three facts every record needs

GOV.UK puts it plainly. For each item of self-employment or property income and each expense, your digital record must show:

That is the whole legal core. Your software then adds those records up and sends HMRC totals for each category in your quarterly update — HMRC never receives your individual receipts or invoices. The categories are the ones you already know from a tax return: for a sole trader, the expense headings on the self-employment pages. What you record is decided by qualifying income — what counts towards your MTD threshold: self-employment and property income and expenses are in; your share of a partnership's profit, dividends, the State Pension and private pensions are not, and you do not need digital records for them (though you may keep them if you want a fuller tax estimate in your software).

What counts — and what does not

The most common misunderstandings, settled by GOV.UK's own guidance:

• A shoebox of receipts is not a digital record. Paper receipts are proof, not records. The record is the dated, categorised entry in your software; the receipt is the evidence behind it, and you must keep the originals or copies — bank statements, invoices, receipts — that you used to prepare your return.
• A photo of a receipt is not a digital record on its own. A photo has no date field, no amount field and no category. But a photo that has been turned into a dated, categorised entry in your software is exactly what HMRC wants, with the photo kept as backup.
• You do not upload receipts to HMRC. Ever. Quarterly updates are category totals, described by HMRC as summaries, not tax returns. Keep the receipts for HMRC to ask about later — see the 5-year rule below.
• A spreadsheet counts — if it is digitally linked. A spreadsheet holding your records plus recognised bridging software that submits them meets the rules, provided the figures move between the two by a digital link, not by retyping. The two routes are compared in MTD-compatible software: spreadsheet and bridging software.
• A bank feed helps but does not finish the job. If your software connects to your bank account, some transactions will still need detail added — such as the Self Assessment category — and some will not appear in full and must be created separately. It is your responsibility to check the records are accurate before sending an update.
• Disallowable expenses need no record at all — the personal part of a mixed bill, for example. If you do record them, record just the allowable portion, or the total plus the disallowable portion, or the total with a category-total adjustment before you finalise. Using simplified expenses flat rates? Then you need no digital records of the actual costs at all — but you must make the adjustment before finalising your tax position.

The under-£90,000 simpler option

If your turnover from a source of self-employment — or your total UK property turnover — is less than £90,000, GOV.UK lets you categorise in less detail for that tax year. A sole trader then only needs to record whether each transaction is income or an expense: no expense headings at all. Landlords of residential property get a narrower version: income or expense, plus — for expenses — whether it is a restricted finance cost. If you have more than one income source, the simpler option applies per source: each one must be under £90,000 on its own. And if your turnover reaches £90,000 during the year, you must categorise all of that source's records in full — from the beginning of the current tax year — before you can send a quarterly update or submit your return. If you are unsure whether you will reach £90,000, GOV.UK's advice is to categorise in full from the start.

Retailers get a different simplification: instead of recording every individual sale, you may record your daily gross takings as a single digital record. That matters for anyone whose till rings up dozens of small sales a day.

One set of records per business — with two exceptions

If you have more than one sole-trader business — an electrician who also teaches driving, say — you need separate digital records for each, and you send a separate quarterly update for each. Landlords work differently: all your UK properties are legally one “UK property business”, so one set of records and one quarterly update covers them all, and a property you own jointly contributes only your share. Foreign property is the opposite: separate digital records for each individual foreign property (and for your share of any jointly let one), though they are added together into one quarterly update for your foreign property business. Landlords can follow the whole annual cycle in MTD for landlords: quarterly updates, end-of-period statements and the final declaration.

Jointly let property also has its own simplifications: you may create one digital record per category for the whole quarter instead of one per month, or leave jointly let expenses out of your quarterly updates entirely and add them before you submit your tax return (by resending the fourth update or adjusting the category total). Expenses for properties you own entirely must still go into the quarterly updates.

Digital links: the rule that catches people out

If you use more than one software product — say a spreadsheet for records and bridging software for submissions — the two must be joined by a digital link: linked spreadsheet cells, an emailed file imported into the other product, a USB stick handed over and imported, XML or CSV import/export, an automated transfer, or an API. What you must not do, once a record has been created and sent to HMRC in a quarterly update, is move it manually — no copying figures out by hand, no cut and paste between cells or products. A single product that does everything needs no links at all. The link must be in place before you send your first quarterly update or submit your return.

When to start, and what if you join mid-year

Records start from 6 April of the relevant tax year if your accounting period ends on 5 April, or from 1 April if it ends on 31 March (in which case you should use calendar update periods — the choice is made in your software before your first update and cannot be changed mid-year). Create each record as close to the transaction date as possible, and in any case before the quarterly update deadline for that period, or before you send that update if that is sooner. If you signed up partway through the tax year, catch up by creating records from the start of the tax year — they go into your first quarterly update. There are no penalties for missing a quarterly update deadline in 2026/27, but the updates must all be in before your final declaration. Which wave you are in — and when you must start — is on the MTD deadline calendar, or work it out on the Making Tax Digital checker. The sign-up steps themselves are in How to sign up for Making Tax Digital for Income Tax.

Two edge cases worth knowing

If you only know your net income — what is left after expenses — record the full gross income and the expenses as separate digital records. And if someone else tells you about income late — a trust or partnership reporting after a quarterly update deadline — you may either estimate it and confirm it later, updating the record when the figure is confirmed, or record it only once you are told. Either way it lands in your next quarterly update; if you have already sent the fourth update, resend it with the confirmed figure.

The trading income allowance and property income allowance have a trap of their own: if you claimed either allowance on your last Self Assessment return, you must keep digital records of that income even if it is below the allowance — because you declared it. You only escape record-keeping for income that was both below the allowance and not declared on your previous return. The April 2027 and April 2028 waves, when these allowances start to bite for far more people, are explained in MTD April 2027: the £30,000 wave and MTD April 2028: the £20,000 wave.

Correcting a record, and how long to keep everything

Mistakes are fixed in the software, not by resending old updates: change, delete or create the record, and the correction flows into your next quarterly update. If you have already sent the fourth update, either correct the record and resend it, or adjust the category total in your software and reflect the change in your records. Correct as soon as you spot the error — GOV.UK is explicit about that.

And keep everything. You must keep your digital records for at least 5 years after the 31 January submission deadline for that tax year — the same period as Self Assessment. For the 2026/27 tax year, whose final declaration is due 31 January 2028, that means keeping records until at least 31 January 2033. The quarterly update dates themselves never move — 7 August, 7 November, 7 February and 7 May — and from 2027/28 a missed one earns a penalty point, as explained in MTD penalty points explained. You can test your own exposure on the penalty estimator.

Three facts, kept as you go, in software that talks to HMRC. That is the whole of digital record-keeping — everything else is evidence you file away and keep for five years.

Sources

• GOV.UK — Create digital records for Making Tax Digital for Income Tax (what each record must contain; simpler categorisation under £90,000; retailers' daily gross takings; digital links; separate records per business; jointly let property; allowances; disallowable and simplified expenses; estimates and corrections; 5-year retention)
• GOV.UK — Send quarterly updates for Making Tax Digital for Income Tax (quarterly updates are category totals; HMRC does not receive individual receipts or invoices; updates are summaries, not tax returns)
• GOV.UK — Find out if and when you need to use Making Tax Digital for Income Tax (waves and thresholds: over £50,000 → 6 April 2026; over £30,000 → 6 April 2027; over £20,000 → 6 April 2028)

Free information tool — not tax advice. Figures follow GOV.UK and HMRC guidance as checked on 8 November 2026. Confirm your own position with HMRC or an accountant.