If you are asking what records you need to keep for Making Tax Digital, the short answer is this: if Making Tax Digital for Income Tax applies to you, you must keep digital records of your self-employment and or property income and expenses using software that is compatible with HMRC’s system. You also still need the usual supporting evidence behind those figures, such as invoices and bank statements. The exact records required depend on your business or property activity, but the principle is clear: key tax data must be stored digitally and be capable of feeding your quarterly updates and tax return.
For many sole traders and landlords, that is the real shift. Traditional Self Assessment has often allowed a mix of paper files, spreadsheets and manual processes. Under the current HMRC digital record-keeping notice and the Income Tax (Digital Obligations) Regulations 2026, relevant taxpayers within scope of MTD for Income Tax must keep specified records digitally and use functional compatible software.
In this guide, Business Help Group UK explains what making tax digital record keeping means in practice, what documents you should keep, who is affected under current official rules and how to get your records in shape before mistakes become expensive and time-consuming.
Who needs to keep digital records for Making Tax Digital?
According to HMRC’s current guidance, MTD for Income Tax is being introduced in stages. HMRC says it applies from April 2026 for relevant persons with total income above £50,000, from April 2027 for those above £30,000 and from April 2028 for those above £20,000.
That staging is important because businesses and landlords often assume MTD is either already universal or still some distant future change. Neither assumption helps. If you are a sole trader, a landlord or both, you need to understand when the rules are likely to affect you and what “digital records” actually means under HMRC’s framework.
The law and guidance referred to here concern MTD for Income Tax, not every tax in the same way. For example, HMRC’s general record-keeping page says there are no fixed rules on how you must keep records for Self Assessment generally, while VAT has its own digital record requirements for many businesses within MTD for VAT. You can see that distinction in HMRC’s pages on keeping tax records and keeping VAT records.
What records must be kept digitally for MTD for Income Tax?
HMRC says you must create and store digital records of your self-employment and property income and expenses using software compatible with MTD for Income Tax. HMRC also says you must keep the normal Self Assessment supporting records, including documents such as bank statements and invoices. The core official guidance is here: create digital records for Making Tax Digital for Income Tax.
In practical terms, your digital records need to capture the financial information needed for:
- quarterly updates
- your year-end tax return information within the MTD process
- the details behind those figures, including amounts and dates received or incurred
That requirement is reflected in HMRC’s digital record-keeping notice, which says the digital records must include the financial information required for quarterly updates and the tax return, together with details of the relevant items.
For sole traders
If you are self-employed, your digital records should cover your business income and business expenses. That means your bookkeeping system should record transactions in a way that allows your software to build the figures HMRC needs. In most cases, that will include the amount of income, the amount of each expense or grouped expense entry where permitted by your software process and the date money was received or the expense was incurred.
You will normally also need to retain the underlying evidence for those entries. Examples commonly include:
- sales invoices issued to customers
- purchase invoices and supplier receipts
- bank statements
- payment confirmations
- other business records supporting the amounts entered
For landlords
If you receive property income, HMRC says you must keep digital records of your property income and expenses. As with self-employment, the point is not simply to have a bank feed or a rough total at year end. You need a digital record of the relevant income and costs that can support the submissions required under MTD for Income Tax.
Supporting records might include:
- rent schedules
- letting statements
- invoices for repairs or services
- mortgage-related records where relevant to your tax position
- bank statements and payment records
Your own circumstances matter here. Property businesses can vary significantly, so the right record set depends on the nature of the income and expenditure.
If you have both self-employment and property income
If you fall into both camps, you may need separate digital records for each source. The legislation and HMRC guidance focus on keeping the specified records for the relevant income sources, so a single pile of mixed paperwork or one annual spreadsheet prepared after the event is unlikely to be good enough if MTD for Income Tax applies to you.
Do you still need to keep invoices, receipts and bank statements?
Yes. This is one of the most important points businesses miss.
MTD does not replace the need for normal supporting records. HMRC’s guidance specifically says that as well as creating and storing digital records, you must keep the usual Self Assessment supporting records, such as bank statements and invoices.
So if your bookkeeping software shows a number, you should still be able to support it. That matters for accuracy, year-end adjustments and any HMRC check into the figures submitted.
For many clients, the most workable approach is:
- use software to record income and expenses as they arise
- attach or store digital copies of invoices and receipts where possible
- keep bank records organised and easy to trace
- reconcile regularly rather than waiting until year end
That approach tends to reduce errors and makes your compliance process smoother.
What does functional compatible software mean?
Under the Income Tax (Digital Obligations) Regulations 2026, relevant persons must keep the specified digital records and use functional compatible software.
In plain English, that means software capable of keeping the required digital records and interacting with HMRC’s MTD system in the way the rules require. The exact features will depend on the product, but at a minimum the software must support compliant record keeping and submissions.
This is why businesses should be careful about assuming that any spreadsheet, any bookkeeping app or any manual workaround will qualify. Whether your setup is compliant depends on whether it genuinely supports the digital obligations in force for your situation.
If you are reviewing software, it is sensible to ask:
- can it store the necessary digital records for self-employment and or property income
- can it produce the data needed for quarterly updates and tax return submissions
- does it fit how your business actually operates day to day
- can your accountant access and review the records efficiently
What information should each digital record include?
HMRC’s digital record-keeping notice says digital records must include the financial information required for quarterly updates and the tax return, plus the details of the items in that information, including amounts and dates received or incurred.
That means your records should not be limited to broad annual totals. They need enough detail to support the figures reported through the MTD process.
Although businesses organise books differently, the essential idea is that your records should allow someone to understand:
- what the transaction was
- when it happened
- how much it was for
- whether it related to business or property income or expenditure
Where records are messy, duplicated or incomplete, quarterly reporting becomes much harder than it needs to be. Good making tax digital record keeping is not about adding admin for the sake of it. It is about producing accurate figures from clean records throughout the year.
How is MTD record keeping different from ordinary Self Assessment record keeping?
Under general Self Assessment rules, HMRC says there are no specific rules about the format in which records must be kept. You can see that on the official page about keeping your pay and tax records. In practice, that has allowed many people to rely on paper files, notebooks or year-end spreadsheets.
MTD for Income Tax changes that for those within scope. The difference is not simply that you must keep records. It is that certain records must be kept digitally and maintained through functional compatible software.
That has practical consequences:
- less room for paper-only systems
- greater need for regular bookkeeping during the year
- more importance placed on transaction dates and categorisation
- higher value in choosing software and processes that work first time
For some businesses, this will be a modest adjustment. For others, especially those who still hand over a carrier bag of paperwork after the tax year ends, it is a major process change.
Common mistakes to avoid with making tax digital record keeping
Assuming digital records just means online banking
Bank feeds can help, but they do not on their own guarantee compliance. You still need the right underlying records and categorisation.
Leaving bookkeeping until the year end
MTD for Income Tax is designed around more regular digital reporting. If your records are only updated once a year, you are likely to struggle.
Keeping the figures but not the evidence
HMRC’s guidance is clear that usual supporting documents still matter. Software totals without invoices, receipts or statements behind them can create problems.
Using software that does not match your needs
The cheapest or simplest option is not always the best. If you have multiple income sources or complex property records, your system needs to handle them properly.
Mixing personal and business transactions carelessly
Where accounts are mixed and explanations are missing, compliance becomes slower and more error-prone. Clear separation and regular review can save a great deal of time.
How to prepare now
If you expect MTD for Income Tax to affect you, early preparation is usually far easier than a rushed switchover. A sensible plan often includes:
- identifying whether you are likely to come within the current rollout timetable
- reviewing how you currently keep self-employment or property records
- checking whether your existing software is suitable
- moving paper-heavy processes into a digital workflow
- deciding who will maintain the records and who will review them
The aim is not just technical compliance. It is a record-keeping process that gives you reliable figures, fewer surprises and less stress when reporting deadlines approach.
Frequently asked questions
Do I need to scan every paper receipt for MTD?
HMRC’s current guidance says you must keep digital records and also keep the normal supporting records, such as invoices and bank statements. The guidance does not say on the official pages cited here that every paper receipt must always be scanned in every case. What matters is that your required records are kept digitally and your supporting evidence is retained appropriately for your circumstances. If you want certainty on your own setup, take advice before relying on a paper-only process.
Can I still use spreadsheets for making tax digital record keeping?
The key issue is not whether a spreadsheet exists, but whether your overall system meets the requirement to keep specified digital records and use functional compatible software under the current regulations. If your process does not achieve that, a spreadsheet alone may not be enough.
Do landlords have to keep digital records too?
Yes, where MTD for Income Tax applies to them. HMRC says digital records must be kept for property income and expenses using software compatible with MTD for Income Tax. See the official guidance on creating digital records.
Is this the same as MTD for VAT?
No. MTD for VAT has its own rules and HMRC says many VAT-registered businesses must keep some VAT records digitally unless exempt. That is a separate regime from MTD for Income Tax, even though both involve digital record keeping. HMRC’s VAT record guidance is here: keeping VAT records.
What if I have both rental income and self-employed income?
You may need digital records covering both income sources if MTD for Income Tax applies to you. The records must support the required submissions and include the relevant transaction details, amounts and dates.
Final thoughts
Making tax digital record keeping is really about two things: keeping the right tax information digitally and keeping the underlying evidence that supports it. For those within scope of MTD for Income Tax, HMRC’s position is no longer just a general encouragement to go digital. The rules require specified digital records and compatible software.
If you are not sure whether your current system will stand up to MTD, now is the time to review it. Business Help Group UK can help you assess your current records, improve your bookkeeping process and move towards a practical MTD-ready system that suits your business or property income. Get in touch with Business Help Group UK to discuss your next steps.
