Create digital records
How to create and store digital records of your self-employment and property income and expenses for Making Tax Digital for Income Tax.
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.
You or your agent need to create and store digital records of your self-employment and property income and expenses.
You must also continue keeping records like you normally do for Self Assessment. For example, you still need to keep original records or supporting documents (or copies of them) that you have used to prepare your tax return.
Before creating your digital records, you should check that you have followed all the steps in signing up, including authorising your software.
You need to get software that works with Making Tax Digital for Income Tax.
The software you choose needs to either:
- create digital records and make submissions to HMRC
- connect to your own record-keeping software (such as a spreadsheet) and make submissions to HMRC — this is also known as ‘bridging software’
You can choose to use either:
- a single software product that does everything and meets all your needs
- more than one software product, that when used together will meet all your needs
If you use more than one product, you’ll need to make sure they can work together to meet all your Making Tax Digital for Income Tax requirements, including digitally linking your records between the products.
If you have an agent, you should discuss your software options with them as they may already be using software that works with Making Tax Digital for Income Tax.
If you use a single software product
Your software will allow you create your digital records, send HMRC your quarterly updates and submit your tax return.
You do not need to digitally link your software to other products if you use a single software product to do everything.
If you use more than one software product
You need to digitally link your record-keeping software and software that uses your records to make submissions to HMRC.
You should do this when you set up the compatible software or before you:
- send your quarterly updates to HMRC
- submit your tax return
Once you’ve created a digital record and it has been sent to HMRC in a quarterly update, you must not manually move the record within your record-keeping software or to other software.
For example, you must not:
- copy information by writing it out in another cell or in other software
- use ‘cut and paste’ or ‘copy and paste’ to move records
How to digitally link your records in your software
You can digitally link your records in different ways, including:
- using linked cells in spreadsheets — for example, if you have a formula in one sheet that mirrors the source’s value in another cell and the cells are linked
- emailing a spreadsheet containing digital records, so the information can be imported into another software product
- transferring a set of digital records onto a portable device (for example, a pen drive, memory stick or flash drive) and physically giving this to someone who imports the data into their software
- XML, CSV importing and exporting, and downloading and uploading files
- using an automated data transfer
- using an application programming interface (API) transfer
You do not need to digitally link:
- records of income that are not self-employment or property income and expenses — for example, income from dividends or savings
- software that’s not used to create digital records of self-employment and property income and expenses — for example, software that takes bookings or a till system that records sales receipts
- software that’s only used to submit your tax return with software used to keep digital records and send quarterly updates — the first type of software gets the data directly from HMRC
If you are a landlord that jointly lets a property, you do not need to link your digital records to the records of the other landlord.
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
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 will 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.
If you are a sole trader
If you have more than one sole trader business, for each source of self-employment income you have you will need to:
- create separate digital records
- send separate quarterly updates
For example, if you are an electrician as well as a driving instructor, you should create one set of digital records for each of your businesses and send separate quarterly updates for each.
Using the trading income allowance
You will need to create digital records for your self-employment income and include it in your quarterly updates if both of the following apply:
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you claimed the trading income allowance on your last Self Assessment tax return
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the self-employment income you declared on your last Self Assessment tax return was more than the trading income allowance threshold
At the end of the tax year, you can claim the allowance when you submit your tax return using your compatible software.
For example, in your tax return for the 2024 to 2025 tax year, you used the trading income allowance and you declared:
- property income of £60,000
- self-employment income of £1,900 from a side hustle
In the 2026 to 2027 tax year, you’ll need to keep digital records of both the property and the self-employment income because your self-employment income was above the trading allowance threshold.
You do not need to keep digital records of self-employment income for the purposes of Making Tax Digital 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
If you are a landlord or get property income
You should create separate digital records for your personal UK and foreign property businesses. Your:
- UK properties are treated as one ‘UK property business’
- non-UK properties are treated as one ‘foreign property business’
Your share of any jointly let properties will form part of either your UK or foreign property business.
Using the Rent-a-Room Scheme
You will need to create digital records of your UK property income covered by the scheme and include it in your quarterly updates if either you:
- used the Rent-a-Room Scheme for your home and received income from another UK property on your last Self Assessment tax return
- did not receive any other UK property income but the gross profits from your UK property were more than the Rent-a-Room Scheme threshold on your last Self Assessment tax return
For example, in your tax return for the 2024 to 2025 tax year you declared UK property income of £55,000. You made use of the Rent-a-Room allowance, but were not required to declare the income, as it was below the Rent-a-Room threshold.
In the 2026 to 2027 tax year, you’ll need to create digital records for all your property income, including your Rent-a-Room income.
Using the property income allowance
You will need to create digital records of your UK property income and include it in your quarterly updates if both of the following apply:
- you claimed the property income allowance on your last Self Assessment tax return
- the UK property income you declared on your last Self Assessment tax return was more than the property income allowance threshold
At the end of the tax year, you can claim the allowance when you submit your tax return using your compatible software.
For example, in your tax return for the 2024 to 2025 tax year you used the property income allowance and declared:
- self-employment income of £64,000
- property income of £1,800
In the 2026 to 2027 tax year, you’ll need to keep digital records of both the property and the self-employment income because your property income was above the property allowance threshold.
You do not need to keep digital records of property income for the purposes of Making Tax Digital 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 your software connects to your bank account
If you use software that connects to your bank account to help you to create digital records, you may need to add additional detail, such as expenditure categories.
Some transactions may not appear in full in your bank feed and will need to be created separately as a digital record in your software.
You should check your digital records are accurate before sending your quarterly update to HMRC.
There are some records you do not need to keep digitally but can choose to do so. This can help you maintain a more complete view of your tax affairs, as every time you send a quarterly update you’ll be able to see an estimated tax bill in your software.
You do not need to create digital records for all other sources of income reported through Self Assessment, such as income from employment (PAYE), a partnership or dividends (including those from your own company).
For example, you might be a sole trader that also receives income from a business partnership. You will need to create digital records for your sole trader business but not for the partnership income.
If your software that works with Making Tax Digital for Income Tax has the functionality, you can choose to report these income sources during the tax year, through your software.
If you get new self-employment and property income
You can voluntarily create digital records for your new self-employment or property income if you’re already using Making Tax Digital for Income Tax. However, you do not need to create them until after you submit a tax return using compatible software which includes the income from that business for the first time.
For example, you may start a new business in May 2027. Your first tax return that will include the income from this business will be the tax return for the 2027 to 2028 tax year, which you would need to submit using your compatible software by 31 January 2029. In this instance, you’ll need to start creating digital records for the new business from 6 April 2029, but you can choose to create them earlier.
Disallowable expenses
These are expenses that are not wholly for business use, so a portion of them cannot be claimed on your tax return.
If you currently keep a record of the disallowable portion of your expenses, then you should continue to do this by creating digital records of these amounts in your software.
For example, you have a mobile phone bill which totals £200. The bill is made up of:
- £125 for business calls
- £75 for personal calls (which is the disallowable portion of the expense)
If you choose to create a record of the disallowable portion, you will create a digital record of:
- the full £200 expense
- the £75 disallowable portion
Simplified expenses
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.
Find out more about simplified expenses.
Transactions 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 a transaction (including capital elements) — you should then make an adjustment before submitting your tax return
- create a digital record of just the revenue amount
For example, 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.
You can choose to create and categorise your digital records in a particular way if either:
- you jointly let property with another landlord
- your turnover is below the VAT threshold
- you are a retailer
You can read more information on VAT thresholds.
If you are a landlord that jointly lets properties
You only need to create digital records that relate to your share of income and expenses from your jointly let properties.
To simplify your record keeping, you can choose to:
- create less detailed digital records for the income and expenses from your jointly let properties
- not include expenses which relate to jointly let properties in your quarterly updates — you will need to include this information when you finalise your Income Tax position after the end of the tax year and before you submit your tax return
For jointly let properties only, creating less detailed digital records means:
- creating a single digital record for each category of property income that you receive in an update period
- creating a single digital record for each category of property expense that you incur in a tax year
For example, a landlord with a jointly let property, could either:
- create 3 digital records, showing £1,000 of rent they received each month
- just create one digital record for the quarter, showing £3,000 of rent received
Simpler categorisation if your turnover is below the VAT threshold
You can choose to categorise your digital records in less detail for a tax year, if you have either of the following:
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total UK property turnover of less than £90,000 (this also applies if you are a landlord that jointly lets a property)
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turnover from a source of self-employment that is less than £90,000
If you have more than one income source, you can only use simpler categorisation for both income sources if your turnover is below the VAT threshold for each income source.
If you’re a sole trader, you only need to record whether a transaction is income or an expense.
If you’re a landlord and receive rental income from residential property, you need to categorise your expenses in more detail even if your turnover is below the threshold. You must:
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Record if a transaction is an income or an expense.
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If it is an expense, record whether the expense is for a restricted finance cost.
If your turnover later goes above the VAT threshold
If your turnover goes above £90,000, you will need to categorise all digital records for that income source in full before you can send your quarterly update, including those:
- from the beginning of the current tax year
- in the following tax year
If you do not categorise your records for that income source in full, you’ll not be able to send quarterly updates or submit your tax return.
If you’re unsure if your turnover will go above £90,000, you should categorise your digital records in full detail.
If you’re a retailer
You can choose to create a digital record of your daily gross takings, instead of individual sales that you make.
Read more about creating digital records of retail sales.
There are some decisions you should think about at the beginning of the tax year, even though you might currently make them after the tax year has ended.
Consider your accounting period
Your software will default to an accounting period that aligns with the tax year (6 April to 5 April).
If you have an accounting period that ends on the 31 March each year, you should make sure you have chosen calendar update periods in your software at the start of the tax year. This will make your record keeping simpler.
You cannot change to calendar update periods partway through a tax year.
Consider which accounting method to use
You may want to consider which accounting method you’ll use for your record keeping. This will either be:
If you’re not sure, you can create digital records during the tax year and then confirm your accounting method when you submit your tax return.
Choose how to categorise your records
You may want to use simpler categorisation for your digital records if you are eligible.
Choose whether to use simplifications for your jointly let properties
You may want to create less detailed records or not include expenses in your quarterly updates. These simplifications can only be used for properties that you jointly let with another landlord.
You will need to create digital records for a quarterly period before either:
- the quarterly update deadline for that period
- sending that quarterly update, if this is before the deadline
For example, you will need to create a digital record of income you receive on 30 April before (all of the following):
- you send your first quarterly update
- 7 August — the deadline for that update
You should create digital records as close to the date of the transaction as possible. This will help you have a more up to date view of your business affairs.
During the testing phase, if you sign up partway through the tax year, you do not need to catch up with your digital record keeping straight away, as late submission penalties for quarterly updates do not apply. You can read more about catching up in If your circumstances change.
If you are a landlord that jointly lets properties
If you have chosen not to include expenses which relate to jointly let properties in your quarterly updates, then you do not need to create digital records for those expenses every quarter.
You will need to create digital records for these expenses before you finalise your Income Tax position at the end of the tax year. You will then need to resend your fourth quarterly update to include these records before you submit your tax return.
If you only get told about your net income
If you only get told what your income is after expenses, such as letting agent fees, are deducted (also known as net income) you need to do the following.
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Ask what the full amount of income was before expenses were deducted.
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Create a digital record for the full amount of income.
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Create a digital record for your expenses.
If someone else tells you about your self-employment or property income
If a trust or partnership tells you about your personal self-employment or property income after the quarterly update deadline, you can either:
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estimate your income or expense and then confirm it later
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record the income or expense once you are notified of it
This includes disguised investment management fees or income based carried interest.
You do not need to create digital records for income you received from a business partnership.
If you estimate your income or expense
You should:
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Create a digital record for the transaction.
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Update the digital record when the income or expense is confirmed.
It will then be included in your next quarterly update.
If you have already sent your fourth quarterly update, you will need to resend the update to include the confirmed income or expense.
If you only record the income or expense once it’s confirmed
You should:
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Send quarterly updates during the tax year that confirm you received no income and incurred no expenses for that income source.
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Create a digital record for the income or expense when you receive the information.
It will then be included in your next quarterly update.
If you have already sent your fourth quarterly update, you will need to resend the update to include the confirmed income or expense.
You will need to have finalised your digital records before you submit your tax return.
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 included 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 (for example, a spreadsheet), you should make the correction there and then digitally link your records to your bridging software.
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 (this may be easier if you are a sole trader or landlord that 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)
When to correct digital records
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.
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.
When you have chosen how you will create and store your digital records, you should check when you need to send updates to HMRC.