MTD for Income Tax: Digital record keeping and compliance

From April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment will change the way many businesses and landlords keep and submit their tax records. One of the key requirements is maintaining digital records.

What is a digital record?

A digital record is an electronic record of your self-employment and/or property income and expenses that meets HMRC’s requirements. It must include:

• Date of the transaction
• Amount (income or expense)
• Category/type (such as rent, repairs, sales, travel)
• Customer or supplier details where relevant

Key elements of digital records for Making Tax Digital

These records must be stored in MTD-compatible software. Simply scanning receipts or typing figures into a document is not enough. When managing your digital records, you will also need to consider:

Digital links – If you use multiple systems, data must flow between them via digital links such as APIs or secure file imports. Copying and pasting or retyping figures is not compliant.

Separate income streams - If you have multiple businesses or property income streams, you must keep separate digital records for each one.

Timely and accurate recording – Transactions should be entered as they occur or shortly after - not just at the end of the quarter. This will reduce errors and keep tax estimates meaningful.

Retention and audit trail – Your digital records must be kept in a way that preserves a clear audit trail. Original paper receipts can be retained, but the data must be entered digitally.

MTD compliance checklist

• Choose HMRC-approved software that suits your business.
• Set up digital links between systems and avoid manual transfers.
• Record transactions promptly and accurately.
• Categorise income and expenses correctly using HMRC guidelines.
• Back up your data regularly.

Why accurate digital records matter

Maintaining digital records correctly ensures you meet MTD requirements, avoid penalties, and benefit from more accurate, real-time financial information.

Late MTD submissions will trigger a new points-based penalty system, which will amount to a £200 penalty - though this does not apply to quarterly submissions in the 2026/2027 tax year.