Digital Record Keeping for MTD: What Counts

MTD requires you to keep digital records of your business transactions. But what exactly qualifies as "digital"? Can you use a spreadsheet? Does scanning receipts count? Here is a clear explanation of what HMRC expects.

What Digital Record Keeping Means

Digital record keeping means maintaining your business financial records in software rather than on paper. Specifically, the following information must be held digitally:

For each business transaction:

• The date of the transaction
• The amount
• The category (income type or expense type)

For your business overall:

• Your business name and address
• Your name
• Your National Insurance number
• Your accounting period dates

You do not need to store images of every receipt digitally, although this is good practice. What HMRC requires is that the transaction data is in digital form.

What Counts as Digital Records

The following qualify as digital records for MTD:

MTD-compatible accounting software — this is the simplest and most complete option. Software like Accounted stores all your transaction data digitally and can submit directly to HMRC.

Spreadsheets with digital links — a spreadsheet (Excel, Google Sheets) counts as a digital record, but only if it has a digital link to MTD-compatible software for submission. You cannot use a spreadsheet alone.

Accounting software that is not MTD-compatible — if you use accounting software that cannot submit to HMRC directly, you need bridging software to connect it. The records in your non-compatible software are still digital records.

What Does Not Count

The following are not acceptable as digital records under MTD:

• Paper ledgers or notebooks — even if very neatly kept
• Typed-up records — a Word document listing your transactions is not structured digital data
• Scanned paper records — scanning your paper ledger does not make it a digital record. The data needs to be in a structured format (rows, columns, categories), not just an image of paper
• Manual entry into HMRC's website — MTD specifically requires software submission, not typing figures into a web form

The Digital Links Rule

One of the less understood MTD requirements is the digital links rule. This means that any transfer of data between software programs or spreadsheets must happen digitally — not by manually typing figures from one place to another.

For example:

• If you keep records in one spreadsheet and summarise them in another, they must be linked by formulas, not by you copying and pasting numbers
• If your records are in a spreadsheet and you submit via bridging software, the bridging software must read directly from the spreadsheet — you cannot type the totals into the bridging tool manually
• If you use two different software packages (one for invoicing, one for expenses), they need to share data digitally

This rule exists to reduce the risk of transcription errors. Every time a human manually copies a number from one place to another, there is a chance of getting it wrong.

How Long Must You Keep Records?

Under MTD, you must keep your digital records for at least 5 years after the 31 January submission deadline for the relevant tax year.

For the 2026/27 tax year:

• Final declaration deadline: 31 January 2028
• Records must be kept until: 31 January 2033

This is the same retention period as under Self Assessment. Using cloud-based software makes this easy, as your records are stored and backed up automatically.

Practical Tips for Digital Record Keeping

Use software with bank feeds. When your bank transactions are imported automatically, most of your record keeping happens without any effort from you.

Snap receipts as you get them. Use your phone or WhatsApp to photograph receipts immediately. Paper receipts fade, get lost, and are hard to find months later.

Categorise weekly. Spend 15 minutes each week reviewing and categorising your transactions. This is far easier than doing three months at once.

Back up regularly. If you use desktop software, ensure you have backups. Cloud-based software like Accounted handles this automatically.

Keep supporting documents. While MTD only requires transaction data to be digital, keep your receipts, invoices, and contracts as supporting evidence in case of an HMRC enquiry.

MTD is coming. Accounted is already compliant. Start free and be ready before the deadline.