Digital record keeping
How Making Tax Digital changes record keeping, what counts as a 'digital record', and how to choose compatible software.
Articles
Making Tax Digital, overview
MTD requires digital records and digital submissions for VAT today, and Income Tax for many landlords from April 2026.
Choosing MTD-compatible software
What to look for in MTD software, the trade-offs between bridging tools and full bookkeeping platforms.
Making Tax Digital for Income Tax (MTD ITSA): what is live now, who is in scope, and what you actually have to do
MTD for Income Tax is live for sole traders and landlords with combined income over £50,000 from 6 April 2026. Quarterly digital submissions, MTD-compatible software, end-of-year declaration: here is the full picture.
What counts as a digital record?
A transaction stored in software or a structured spreadsheet — date, amount, category — rather than on paper or in a PDF. Under Making Tax Digital the data must also move between systems through digital links, not retyping. A paper ledger photographed into a phone is a digital copy, but it is not a digital record.
The distinction matters because MTD is not really about filing. It is about where your records live all year.
MTD for VAT is already law
Every VAT-registered business must keep digital VAT records and file returns through MTD-compatible software. The old HMRC online form is gone. Spreadsheets remain legal, but only when bridging software carries the figures into HMRC digitally — copy-and-paste between systems breaks the digital-link rule.
MTD for Income Tax is live
Since 6 April 2026, self-employed people and landlords with qualifying income over £50,000 must keep digital records and send HMRC quarterly updates. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. One January deadline has become a rolling rhythm of five submissions a year.
The businesses that find MTD painless are the ones whose records were digital before the mandate. That is the real preparation — not the software choice, the habit.
Choosing software without overbuying
Most of our clients need three things: bank feeds that pull transactions in automatically, receipt capture, and MTD-compatible filing. Full accounting suites and simple bookkeeping tools both do this; the right choice depends on whether you run payroll, hold stock, or invoice from the system.
We set clients up on software that fits the business, connect the bank feeds, and run the records through Compliance Vault™ — so the quarterly submissions are a by-product of tidy books, not a separate job.
Frequently asked questions
Are spreadsheets still allowed under MTD?
Yes, if they are structured transaction records and connected to HMRC through bridging software with digital links. What is not allowed is retyping or copy-pasting figures between the spreadsheet and the filing — the chain has to stay digital.
When does MTD for Income Tax apply to me?
It already applies — since 6 April 2026 — if your combined gross self-employment and property income is over £50,000. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. The test is qualifying income — turnover and gross rents, not profit.
What is a digital link?
An electronic transfer of data between systems with no manual rekeying — a formula between spreadsheet cells, an import, or an API connection. Typing a number from one screen into another breaks the link.
Do I have to change my bookkeeping software?
Only if it cannot keep digital records or file through MTD. Most mainstream cloud software is compatible for both VAT and Income Tax. If yours is not, moving is usually a one-month exercise done at a period end — we handle the migration for clients.