Digital Records for MTD: What HMRC Actually Requires (and What It Doesn't)

Updated 2026-06-11 · MTD Survival Kit team

"Keep digital records" is the heart of MTD — and the phrase nobody defines. Here's what the requirement actually is, per HMRC's own guidance, stripped of myth.

The requirement, precisely

For each item of business income and expense, you must digitally record: the date, the amount, and the category it belongs to (from HMRC's official lists). Recorded in functional compatible software — which includes a spreadsheet that connects to HMRC via a digital link — and kept up to date as you go, then preserved.

That's the core. Three fields, every transaction, digitally, promptly.

The categories are not optional

Self-employment expenses must resolve into HMRC's 13 categories (cost of goods, subcontractor payments, staff costs, vehicle/travel, premises, repairs, office, advertising, entertainment, loan interest, financial charges, professional fees, other). Income into 2 (turnover; other). Property has its own sets — including the separate residential finance costs box that trips up landlords.

"Miscellaneous" piles and invented categories can't submit. This is why generic spreadsheets fail MTD even though spreadsheets are allowed.

What you do NOT have to do

Scan every receipt. Digital records means the transaction data, not images. Keeping receipt photos is smart practice (and required for some VAT schemes) but the MTD ITSA record is the date/amount/category row.

Record in real time. "Up to date" isn't "instant". Entering each transaction promptly — weekly is comfortable — meets the spirit and the letter. Reconstructing a quarter the night before its deadline does not.

Itemise to HMRC. Records are itemised; updates send category totals only. HMRC sees ~15 numbers a quarter, not your transactions (though records can be demanded in an enquiry — they must exist).

Use one particular tool. Software, spreadsheet+bridge, or a mix. The legal definition cares about digital form, required fields, digital links and preservation — not brand names.

Corrections: the one habit to learn

After a quarter is submitted, never delete or overwrite its rows. Add a correction row (a negative amount, or the missing item, clearly described). Because updates are cumulative, the next submission automatically carries the fix to HMRC — no resubmission process exists or is needed. Deleting history is how records stop matching submissions, which is the thing an enquiry notices.

Retention

Business records must be preserved — as Self Assessment already required (broadly five years after the 31 January deadline for the year). Same duty, digital form. Back up the file; a OneDrive/Google Drive folder does the job.

The 20-minute compliant setup

A dated row per transaction, category from a dropdown (typo-proof), running quarterly totals per official category, correction-row convention documented. Build it yourself, or take the pre-built, formula-tested version: the MTD Survival Kit (£19) — spreadsheet, plain-English guide, quarterly checklists, free updates when HMRC changes the rules.

Educational content, not tax advice. Record requirements per The Income Tax (Digital Obligations) Regulations 2026 and gov.uk MTD manual ("Create digital records"), June 2026.