Key takeaways
- A digital record is a record of a transaction created and stored in software, such as accounting software, an app or a spreadsheet.
- For MTD for Income Tax each record needs the date, amount and category of the income or expense.
- Records must flow to HMRC through digital links; copying and pasting or retyping figures between programs is not allowed.
- You can keep paper receipts as evidence, but the record itself must be digital.
- Business and property records must normally be kept for at least five years after the 31 January filing deadline, and VAT records for six years.
Making Tax Digital (MTD) is built on one idea: the figures you send HMRC should come straight from records kept in software, with no manual copying in between. Getting the records right is most of the work. This guide explains what a digital record is, what it must contain and the rules on linking software.
What counts as a digital record
A digital record is a record of a business transaction created and kept in software that is compatible with MTD, or linked to compatible software. That includes:
- cloud accounting software, such as the products in our accounting software reviews
- receipt and bookkeeping apps that export to compatible software
- spreadsheets, provided they are linked to MTD bridging software
The underlying evidence, such as invoices, receipts and bank statements, can still be on paper or stored as images. What must be digital is the record of the transaction itself.
What each record must show
MTD for Income Tax
For each self-employment or property business, each digital record must include:
- the date of the transaction
- the amount received or paid
- the category of income or expense, using the categories on the tax return (for example turnover, cost of goods, travel, repairs, letting agent fees)
You can record each transaction individually, or in some cases summarise transactions of the same category made on the same day, such as daily takings in a shop.
MTD for VAT
VAT digital records must include your business name and address, VAT number and any VAT schemes used, and for each sale and purchase the time of supply, the value and the VAT rate (or input tax claimed), plus any adjustments. See Making Tax Digital for VAT.
Digital links
If you use more than one piece of software, the data must pass between them through digital links. Allowed links include:
- formulas linking cells or worksheets in a spreadsheet
- importing and exporting files such as CSV
- automatic transfers through an API or a bank feed
- emailing a file that is then imported by the receiving software
Not allowed:
- retyping figures from one program into another
- copying and pasting between programs
Once a record has been included in a quarterly update to HMRC, it should not be moved manually between programs.
Practical ways to keep digital records
| Approach | Suits | Watch out for |
|---|---|---|
| Accounting software with a bank feed | Most sole traders and landlords | Categorising every transaction correctly; personal transactions in a mixed account |
| Receipt-capture app linked to software | Businesses with many small expenses | Duplicates between receipts and bank feed |
| Spreadsheet plus bridging software | Simple businesses already using spreadsheets | Keeping every link digital and the categories consistent |
| Accountant or bookkeeper keeps the records | Owners who prefer to delegate | Getting information to them in time for each quarter |
A separate business bank account makes digital record keeping much easier, because the bank feed then contains only business transactions.
Corrections and adjustments
- Quarterly updates are cumulative, so you can correct earlier records in your software and the next update will reflect it.
- Year-end adjustments, such as private use, capital allowances or accruals, are made when you finalise the tax return, not in the quarterly records.
How long to keep records
| Records | Keep for at least |
|---|---|
| Self-employment and property records for Income Tax | 5 years after the 31 January filing deadline for the tax year |
| Other Self Assessment records | 22 months after the end of the tax year |
| VAT records | 6 years |
| Company records | 6 years from the end of the financial year |
Keep the supporting documents as well as the digital records, because HMRC can ask to see them in a compliance check. See also record keeping for Self Assessment.
Frequently asked questions
Can I keep paper receipts under MTD?
Yes. Paper receipts and invoices can be kept as evidence, but you must also create a digital record of each transaction in software.
Is a spreadsheet a digital record?
Yes, if it is linked digitally to MTD-compatible bridging software that sends your updates to HMRC.
Do I need to record every transaction separately?
Generally yes, with the date, amount and category. Some businesses can record daily totals of the same type, such as shop takings.
Is copying and pasting a digital link?
No. HMRC treats cut and paste as a manual transfer. Use formulas, imports or automatic links instead.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.