MTD digital records: what to keep, what each record needs and how long to keep it

acrenvo.com/guides/mtd-digital-records, last reviewed 11 October 2026

Fiona is fictional, but plenty of readers will recognise her situation. She lets two flats in the UK, and she earns a little extra from self-employed work at weekends. She has signed up for Making Tax Digital (MTD) for Income Tax and understands that she will send quarterly updates, but she is less sure what she is meant to be recording in the meantime. Does each flat need its own records? What does a single record have to show? And what happens if she gets one wrong? This guide walks through what GOV.UK’s guidance on creating digital records says about each of those questions.

What a digital record is

A digital record is a record of your income or expense that is created and stored using software that works with Making Tax Digital for Income Tax. In practice, that means each piece of income and each expense is written into compatible software, or into a spreadsheet that is digitally linked to it, rather than sitting on paper until the end of the year. Your quarterly updates are built from those records, so the rest of what MTD asks of you depends on them.

The paperwork behind them still matters, too. You still need to keep the original records or supporting documents (or copies of them) that you use to prepare your tax return, such as bank statements and invoices. So Fiona keeps her bank statements and invoices as she always has, and the digital records sit alongside them.

Which income and expenses need a digital record

You need to create and store digital records of your self-employment and property income and expenses, such as:

• self-employment income, including sales, takings and fees
• self-employment expenses, including the cost of stock, travel costs, office costs and financial costs
• property income, including rent, premiums for the grant of a lease, reverse premiums and inducements
• property expenses, including rent, costs of repairs, maintenance or other services

For Fiona, the rent from both flats and the costs of running them belong in the property records, and the money she earns at weekends, along with what she spends to earn it, belongs in the self-employment records. The two are kept apart because MTD treats them as two different businesses.

Property in the UK

You must create digital records for UK property income that you receive and expenses that you incur, such as your rent and the costs of repairs. If you have one or more properties in the UK, they are legally treated as one ‘UK property business’ and you do not need to create separate digital records for each UK property that you have. Your share of any jointly let properties also forms part of your UK property business. Your compatible software adds these digital records together and includes them in one quarterly update. This is good news for Fiona, because it means she does not need to set up a separate set of records for each flat in order to meet the rules.

Property abroad works differently. If you have foreign property income, you must create separate digital records for each individual foreign property you receive income from, and for your share of the income and expenses if a foreign property is jointly let. All of your foreign properties are legally treated as one ‘foreign property business’, so your compatible software adds the separate digital records together into one quarterly update. The guide to property abroad and MTD explains that case in more detail.

Self-employment

Fiona has one self-employed business, so she keeps one set of records for it. If you have more than one sole trader business, you need to create separate digital records and send separate quarterly updates for each source of self-employment income you have. GOV.UK gives the example of someone who is an electrician as well as a driving instructor, who should create one set of digital records for each business and send separate quarterly updates for each.

If you claimed a trading or property allowance

A small side income is easy to overlook, particularly if you claimed an allowance for it in the past, so GOV.UK addresses this directly. You will need to create digital records of your self-employment income and expenses and include them in your quarterly updates if you claimed the trading income allowance on your last Self Assessment tax return. At the end of the tax year, you can claim the allowance when you submit your tax return using your compatible software. You do not need to keep digital records of self-employment income for MTD for Income Tax if both of the following apply:

• the income was below the trading income allowance threshold
• you did not declare the income on your previous tax return

The rule for property income follows the same pattern. You will need to create digital records of your UK property income and expenses and include them in your quarterly updates if you claimed the property income allowance on your last Self Assessment tax return. At the end of the tax year, you can claim the allowance when you submit your tax return using your compatible software. You do not need to keep digital records of property income for MTD for Income Tax if both of the following apply:

• the income was below the property income allowance threshold
• you did not need to declare the income on your previous tax return

If that occasional income comes from selling through online marketplaces or apps, the guide to selling through online platforms explains what those platforms now report to HMRC. If you are not sure which side of these lines your weekend or occasional income falls on, an accountant or tax adviser can look at your last return with you.

What each record must include

A digital record does not need to be long, but it does need three things. When you create records of your income or expenses, you will need to record the:

• amount
• date when the income was received or expenses incurred
• category (the type of category you use depends on the type of business you have)

Making Tax Digital for Income Tax uses the same categories of income and expenses as Self Assessment. So if Fiona has filled in a Self Assessment return before, the categories her software offers should look familiar. If you would like somewhere to start before you choose software, our free record templates set out those same category names in a spreadsheet.

When to start keeping digital records

When you need to start creating digital records depends on your accounting period. GOV.UK sets out two cases.

If your accounting period ends on 5 April

You will need to create digital records from 6 April of the relevant tax year. You do not need to make any changes in your software.

If your accounting period ends on 31 March

You will need to create digital records from 1 April of the relevant tax year and you should use calendar update periods. Using calendar update periods will make your record keeping simpler if your accounting period aligns with the end of a month.

Fiona’s accounts run to 5 April, so she starts on 6 April and leaves her software as it is. If your accounts run to 31 March, it is worth making the calendar update periods choice early, because you cannot change it for that tax year once the first update has gone.

Records you can choose to keep

Not everything on your tax return has to be recorded digitally. You do not need to create digital records for all other sources of income reported through Self Assessment, but you can choose to do so. This includes income from:

• your share of profit from a partnership as an individual partner
• dividends (including those from your own company)
• a State Pension
• private pensions

If you decide to create a digital record of your other income, it will help you get a more complete view of your tax affairs, because when you send a quarterly update you will see an estimate of your tax bill which includes this income. You’ll need to check your software has the option to report the other income source during the tax year. If not, you must include all income sources in your tax return before you submit it using your software.

The same freedom applies to a brand new business or letting for a while. If you’re already using Making Tax Digital for Income Tax, you can choose to create digital records for new self-employment or property income. However, you do not need to create them until after you submit a tax return using compatible software which includes income or expenses from that business for the first time.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

Expenses that need a little more thought

Most records are straightforward: money comes in or goes out, and you note the amount, the date and the category. GOV.UK picks out three kinds of expense where you have a choice about how to record them.

Disallowable expenses

These are expenses that are not for business use, so they cannot be claimed on your tax return. You do not need to create digital records of these expenses, but if you do, you can either create:

• a digital record of just the allowable portion
• digital records of the total amount and the disallowable portion
• a digital record of the total amount and then make an adjustment of a category total, which means you do not need to adjust each individual transaction

If you choose to create a digital record of the total amount, you can make an adjustment of the category total before you submit your tax return.

Simplified expenses

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of creating digital records of your actual business costs. If you’re sure you’ll use a simplified expenses scheme, you do not need to create digital records of your actual expenses. If you’re not sure, you should create digital records of all expenses. If you use simplified expenses, you will need to make an adjustment for this before you finalise your Income Tax position. Recording everything while you are undecided keeps both routes open.

Payments that are part capital and part revenue

If you have a transaction which is part capital and part revenue, you can either:

• record the full value of the transaction, including the capital elements, and then make an adjustment before submitting your tax return
• create a digital record of just the revenue amount

GOV.UK uses a mortgage payment to show how this works, which is exactly the kind of payment Fiona makes each month on one of her flats. If you make a mortgage payment, you will need to create a digital record of either the interest or the full amount. If you create a record of the full amount, you will need to make an adjustment before you finalise your Income Tax position.

Correcting a digital record

Mistakes happen, and GOV.UK sets out how to put them right. You may need to correct a digital record if you:

• made a mistake when creating a digital record
• forgot to record income you received, or expenses you incurred

To correct your records, you may need to change, delete or create a digital record. If you make the correction during the tax year, it will be fixed when you send your next quarterly update. If you have an agent that deals with your record keeping, they can do this on your behalf. If you use software that creates digital records, you can make the correction in your software. If you create digital records in separate record-keeping software, such as a spreadsheet, you should make the correction there and then digitally link your records to your bridging software. The guide to spreadsheets and bridging software explains how that link works.

Things are slightly different once the year’s last update has gone. If you have already sent your fourth quarterly update, you can choose to make the correction by either:

• correcting the digital record and resending your fourth quarterly update, which may be easier if you are a sole trader or landlord who keeps their own digital records
• adjusting the category total in your software and also reflecting it in your digital records (if you have an agent, they may make the correction in this way and ask you to update your records)

On timing, if you find an error or missing information in your digital records, you should correct it as soon as possible. After making the correction, it will be included when you send your next quarterly update. If you have already sent your fourth quarterly update, you will need to make any corrections before you finalise your Income Tax position.

How long to keep your digital records

You will need to keep your digital records for at least 5 years after the 31 January submission deadline for a tax year. This is the same amount of time you need to keep records for Self Assessment. If Fiona already keeps her Self Assessment papers for that long, she can treat her digital records in the same way.

Simpler options and what comes next

GOV.UK also describes some simpler ways to keep records in certain cases, such as less detailed categories for smaller businesses and some options for jointly let property, and the guide to simpler ways to keep MTD records covers those.

Once the records are in place, the next step is sending them. The guide to your first quarterly update walks through how your software turns these records into an update and when each one is due.

Questions about MTD digital records