Making Tax Digital (MTD) is changing how businesses manage and report their taxes. One of the key requirements is keeping digital records, but what exactly does that mean?
In this guide, we’ll break down the types of records you need to keep, how to store them, and what HMRC expects under MTD.
MTD is a government initiative aimed at simplifying and digitising the UK tax system. It requires businesses and individuals to keep digital records and submit tax information using compatible software.
MTD currently applies to VAT-registered businesses and will extend to income tax for self-employed individuals and landlords from April 2026.
Under MTD, you must keep digital records of:
Sales and income
This includes the date, value, and nature of each transaction. You don’t need to store invoices digitally, but the details must be recorded.
Purchases and expenses
Record the date, amount, and category of each expense. Again, while receipts don’t need to be stored digitally, the transaction details do.
VAT details (if applicable)
For VAT-registered businesses, you must record the VAT rate applied, the amount of VAT charged or paid, and the net value of each transaction.
Bank transactions
Many accounting platforms automatically import bank feeds, helping you keep accurate records of money in and out.
Adjustments and corrections
If you make changes to your records, these must be logged digitally with a clear audit trail.
Records must be kept using MTD-compatible software. This means:
HMRC requires businesses to keep records for at least six years. These must be accessible and readable if requested during a compliance check.
Keeping the right records is essential for MTD compliance. By switching to compatible software and digitising your financial data, you’ll not only meet HMRC’s requirements but also gain better visibility over your business finances.
If you’re unsure whether your current setup meets MTD standards, speak to an accountant or software provider for guidance.