UK · Verified 31 July 2026 · Not tax advice

Digital records under MTD: what you must keep, and how

Making Tax Digital does not just change how you file. It changes how you have to keep the books underneath. Your income and expenses have to be recorded digitally, transaction by transaction, and the data has to reach your submission through a digital link rather than by being retyped. This page explains what that means in practice, and where software and spreadsheets genuinely differ.

Digital links explained without jargon Retention periods: we point you at HMRC, not a guess Software vs spreadsheets, honestly

Last verified 31 July 2026. Promotions change roughly monthly — confirm before you subscribe.

The short version

Under Making Tax Digital for Income Tax you must keep your business income and allowable expenses in digital form, transaction by transaction, and the path from those records to your HMRC submission must be made of digital links rather than manual retyping. Those digital records are what your four quarterly updates and your final declaration are built from.

The practical translation, for someone who has never thought about this before:

A digital record is the transaction, not the summary. “March expenses: £1,240” typed into a cell is not what is being asked for. The individual purchases are.
A digital link is data moving without a human retyping it. A bank feed is one. A CSV export that is imported is normally one. Reading a total off a screen and typing it into another box is not.
Paper does not become illegal. You can still receive a paper invoice. It just has to end up captured digitally, and the digital version is what your submission is built on.

Not tax advice — confirm with HMRC or your accountant

Fizoral is an independent comparison site, not an accountancy practice. Everything on this page is general information for UK sole traders and landlords, verified on 31 July 2026. Nothing here is tax advice and nothing on it creates a professional relationship. The Making Tax Digital timetable has already been delayed and re-scoped more than once, so confirm your own position before you act. HMRC’s own guidance is at gov.uk: Using Making Tax Digital for Income Tax.

What must be kept digitally

The records that must be digital are the ones that feed your submissions: your business income and your allowable expenses, recorded as individual transactions with enough detail to categorise them. Everything else in your business — contracts, correspondence, the paper originals — is unaffected by the digital record rule, though you may need to keep it for other reasons.

The table below is a working guide, not an HMRC document. Where the exact treatment of an item matters to you, confirm it at gov.uk or with your accountant.

What has to be held digitally under MTD for Income Tax, and what does not
Item	Must be a digital record?	Why
Each item of business income	Yes	It is the numerator of every quarterly update.
Each allowable business expense	Yes	Categorised expenses are what the update reports.
Rental income, per property source	Yes	Property is a separate source. See MTD for landlords.
The paper receipt itself	Not the record, but keep it	The digital transaction is the record; the paper is evidence. Most software will store the image against the transaction.
A monthly “total expenses” figure typed into a cell	Not sufficient	Summarising before you record defeats the point of a digital record.
Year-end adjustments and reliefs	Handled at the final declaration	They are not part of the quarterly cycle at all.
Contracts, emails, insurance documents	No	Outside the MTD digital record obligation, though you may keep them for other reasons.

Thresholds, mandation dates and the four-updates-plus-final-declaration structure come from the verified fact table in SITE-SPEC §3. Item-level record treatment is a practical reading, not a verified HMRC list — confirm at gov.uk.

What a “digital link” actually means

A digital link is a transfer of data from one piece of software to another that happens without a human retyping, re-keying or manually copying it. The whole chain, from the first digital record through to the figure that lands at HMRC, is supposed to be joined up this way.

The word “link” makes it sound technical. It is not. Here is the test that works for almost everybody: if you removed yourself from the process, would the number still get from A to B? If yes, it is a digital link. If the number only moves because you looked at one screen and typed into another, it is not.

Normally a digital link

A bank feed pulling transactions into your software automatically.
An API connection between two systems — your invoicing tool and your ledger, for example.
A CSV or XML export from one system that is then imported into another without the figures being edited by hand in between.
Linked cells and formulas within and between spreadsheet files.
Bridging software reading your spreadsheet directly and submitting from it.

Not a digital link

Reading a total off a screen and typing it into another application.
Manual copy and paste of figures between files as part of the submission chain.
Retyping a bank statement into a spreadsheet from a PDF or a paper copy.
Hand-writing a summary and entering only that summary.
Emailing a figure to your accountant for them to key in for you.

Where the exact boundary sits

HMRC has published its own definition and, historically, has applied transitional easements when the rules were new. We are not going to summarise the current easement position as if it were settled fact — check gov.uk or ask your accountant. The safe design is the one above: build a chain where nothing depends on you retyping a number.

How long you have to keep records

HMRC sets minimum retention periods for business records, and they vary by circumstance. We have not verified a specific figure for MTD for Income Tax, so we are not going to print one. Get the current requirement from gov.uk or your accountant, then set your retention comfortably beyond it.

That answer is less useful than a number, and we know it. It is also the only honest one we can give you: retention periods are exactly the kind of detail that gets copied between websites, goes stale, and then gets quoted back with total confidence years later. If you have landed here from a page that gave you a clean figure, check where that figure came from.

What we will say, because it is practical rather than regulatory:

Whatever the minimum is, cloud software will outlast it by default as long as you keep paying for the account — which is a reason to think about what happens when you cancel.
Export before you cancel. If you switch platforms, take a full data export first. A subscription lapse should never be the reason a record disappears.
Spreadsheets need a backup policy you actually run. A file on one laptop is not a retention strategy. Cloud storage with version history is.
Keep the evidence alongside the record. Attaching receipt images to transactions in software costs nothing and makes an enquiry far less unpleasant.

Software versus spreadsheets, in practice

Both can satisfy the digital record rules, and a spreadsheet plus bridging software is a legitimate route. The difference is not legality, it is where the effort lands: software automates the capture and categorisation, while a spreadsheet leaves those to you and adds a second product to the chain.

Practical differences between keeping MTD digital records in software and in spreadsheets
	Accounting software	Spreadsheet + bridging software
Getting transactions in	Bank feed, automatic	Manual entry or import, by you
Categorising	Rules and suggestions, improves over time	Your formulas and your discipline
Digital link to HMRC	Built in — one product end to end	Bridging tool reads the sheet and submits
Number of products to keep working	1	2
Separating self-employment from property	Native, as separate sources	Your tab structure has to enforce it
Cost over 24 months, entry plan, ex VAT	£0 to £399	Sheet is free; bridging tool is not
Best for	Anyone who wants the capture automated	People with an established sheet that genuinely works

24-month software range: £0 (FreeAgent free permanently with NatWest, RBS, Ulster Bank or Mettle; Sage’s free sole trader tier) up to £399 (FreeAgent Sole Trader at list price). Xero Ignite is £307.20, QuickBooks Sole Trader £186, Sage Accounting Start £378. All ex VAT; Sage publishes plus VAT and we have normalised it. Promotions change roughly monthly. See the 24-month cost comparison.

If you are leaning towards keeping your sheet, read can I keep using a spreadsheet under MTD? before you commit — it sets out the friction honestly, including the cases where staying put is the right call. If you are leaning towards software, start with the genuinely free options rather than the famous ones. MTD compatibility is table stakes: Xero, QuickBooks, FreeAgent and Sage are all on HMRC’s recognised list, and so are cheaper tools. It is not a reason to pay more.

A short checklist before your start date

Do these five things in the tax year before you are mandated and the first quarter under MTD is uneventful. Leave them until the start date and you will be reconstructing a year of records under time pressure.

Confirm your date. Over £50,000 started 6 April 2026; over £30,000 starts 6 April 2027; over £20,000 is planned for April 2028. Run the checker or read am I affected?
Separate the bank accounts if you have more than one income source. Trading and property should not share one.
Pick the tool and connect the feed. The feed is your first and most important digital link.
Run one full quarter for practice before it counts. Categorise as you go and see what breaks.
Write down who does what if an accountant is involved. The obligation is yours even when the work is theirs.

Questions people actually ask

Digital record-keeping: common questions

Short answers. Where the honest answer is “check with HMRC”, that is what it says.

What records must I keep digitally under Making Tax Digital?

The records that feed your quarterly updates: your business income and your allowable expenses, recorded digitally at the level of individual transactions rather than as a monthly lump. Your software or spreadsheet holds the detail; the quarterly update carries only the totals.

Does a photo of a receipt count as a digital record?

A photo is useful evidence, but the digital record HMRC is interested in is the transaction data itself – date, amount, category – held in a digital form that can flow into your submission. Most software lets you attach the image to the transaction, which is the sensible belt-and-braces approach. Confirm the detail of what HMRC accepts on gov.uk.

What is a digital link?

A digital link is a transfer of data between two pieces of software that happens without anyone retyping or copying and pasting it. A bank feed is a digital link. An export to CSV that is then imported is normally a digital link. Reading a number off one screen and typing it into another is not.

Can I still copy and paste between my spreadsheet and my software?

Manual copy and paste is exactly the thing the digital link rule is designed to remove from the chain that ends in your submission. If your process depends on it, that is the part to fix – usually by using bridging software that reads the spreadsheet directly. Check the current position on gov.uk before you rely on any particular workflow.

How long do I have to keep my records?

HMRC sets minimum retention periods for business records, and they differ depending on your circumstances. We have not verified a specific number for MTD for Income Tax, so we are not going to print one. Get the current requirement from gov.uk or your accountant, then set your software’s retention and your backup policy to comfortably exceed it.

Do I have to keep records digitally if I use an accountant?

The obligation sits with you, not with your accountant, even if they do the work. In practice most people who use an accountant under MTD end up on shared software so both sides are looking at the same digital records. Agree who is doing what before your start date, not after it.

Where to go next

Carry on down the chain

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