What records must I keep under MTD? – FAQ

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is HMRC’s programme for sole traders and landlords. This guide explains the MTD records required, how digital record keeping works, and the MTD compliance requirements.

1) What digital records are required for MTD for ITSA?

You must keep digital records (in compatible software) for your sole business and property income and expenses. Each record should capture:

• the amount of the income or expense,

• the date it was received or incurred,

• the category (this may not apply in all cases; it depends on your income level and income source type).

If you have more than one self-employment income source or have UK and/or foreign property, keep separate digital records and send separate quarterly updates for each income source.

2) Do landlords need to keep digital records for MTD?

Yes. Landlords must keep digital records of property income and expenses. UK property and foreign property are treated as separate income sources. Under MTD for ITSA, each person who owns a share in a jointly-let property must keep their own digital records and submit separate quarterly updates for their share of income and expenses. 

3) What is classed as digital record keeping under MTD?

“Digital record keeping” means using MTD-compatible software. You can:

• use one product that records transactions and submits updates, or

• use multiple products (for example, a spreadsheet plus bridging software) that are digitally linked.

Digital links are required between products (imports/exports, APIs, linked cells). Once a transaction has been included in a quarterly update, manual copy/cut-and-paste is not allowed.

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4) Can I keep MTD records in spreadsheets?

Yes – spreadsheets are allowed if they are digitally linked to compatible bridging software for submissions.

Why it may not be the best option:

• Managing multiple files and maintaining digital links can add admin and version-control headaches.

• Because copy/paste isn’t allowed after a record is used in an update, fixing mistakes can be clunky.

• A dedicated app keeps records, categories and submissions in one place, which is typically faster day-to-day and easier to review with an adviser.

5) When should I create records and send updates?

You should add your digital records as soon as possible after each transaction.

• If you use the cash basis, record income when you receive payment for a product or service, and record expenses when you pay them.

• If you use traditional accounting (accrual basis), record income on the date you issued an invoice or completed the work, and record expenses on the date you received a bill or became liable to pay it.

That’s why it’s worth choosing software that lets you create digital records on any device – web or mobile – and makes daily record-keeping simple.

6) How long must I keep MTD-compliant records for HMRC?

Keep your digital records for at least 5 years after the 31 January filing deadline for the relevant tax year (keep longer if you filed late).

7) Can I sign up voluntarily and practise digital record keeping now?

Yes – you can sign up voluntarily before you’re required. During the testing phase, quarterly late-submission penalties don’t apply (they start only when you’re mandated). Annual filing and payment deadlines still apply, so you must file the year-end return and pay on time. This is a simple way to learn the process and make sure you’re comfortable with what records for MTD you need to keep.

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