What records do I need to keep for Making Tax Digital?

Under Making Tax Digital, every sale and business cost needs a digital record showing the amount, date and category. GOV.UK said in October 2026 that under £90,000 turnover, "income" or "expense" is category enough.

Making Tax Digital for Income Tax (MTD) changes where your records live, not what you have to prove. You still keep invoices, receipts and statements. What is new is that each transaction must also be entered in software that works with MTD. The rules below follow GOV.UK as checked on 16 October 2026.

What a digital record is

A digital record is an entry for one sale or one cost, created and stored in compatible software. Each one shows:

• the amount
• the date you received the money or incurred the cost
• a category, using the same categories as the Self Assessment tax return

HMRC never sees the individual records. Your software adds them up into a quarterly update and sends the totals.

The simpler rule for most tradespeople

If your turnover from a self-employment is under £90,000, you can categorise your records in less detail. GOV.UK says a sole trader then only needs to record whether each item is income or an expense. Most sole-trader electricians, plasterers and decorators fall under this line.

If your turnover reaches £90,000 during the year, you must go back and categorise every record for that business in full, from the start of the tax year, before your next update. If you are close to the line, categorise in full from day one.

What to record, and what to keep

Personal spending does not need a digital record at all. Neither do dividends, pensions or a partner's share of partnership profit, although they still go on your tax return.

Bank feeds, spreadsheets and links

Many products pull transactions from your bank. GOV.UK is clear that this does not do the job on its own: you may need to add the category, some transactions may not appear in full and must be added separately, and it is your responsibility to check the records before each update. Cash jobs that never touch the bank need entering by hand.

If you use two products, for example a spreadsheet and bridging software that sends the update, they must be digitally linked. Linked cells, file imports and automatic transfers all count. Once a record has gone to HMRC, you must not move it by retyping, cutting and pasting, or copying and pasting.

What this means for you

If you already keep receipts in a carrier bag and add them up in January, the change is timing. Records for each quarter must be in the software before that quarter's update is sent, and by 7 August at the latest for the first one. GOV.UK suggests creating them as close to the transaction as you can. Ten minutes a week is easier than a lost Sunday every quarter.

Keep everything for at least 5 years after the 31 January deadline for the tax year. That covers the digital records and the paper or PDF proof behind them.

Steps to set up your records

1. Use one bank account for your trade, so business transactions are easy to pick out.
2. Choose MTD-compatible software, or a service that uses it. Our guide to MTD software for sole traders compares options.
3. Start recording from 6 April of your first MTD year. If you sign up partway through, catch up from 6 April.
4. Record every sale at its full amount. For CIS work, that is the gross pay before the 20% or 30% deduction.
5. Record costs as you go and keep the receipt, on paper or as a photo.
6. File your CIS statements each month and check them against your bank.
7. Before each update, look over the totals, add any cash jobs, and correct anything that looks wrong.

The free MTD check shows when MTD starts for you, and the trades section has more on CIS and keeping the books.