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Making Tax Digital: Essential Records for Sole Traders and Landlords

If you're a sole trader or landlord in the UK, Making Tax Digital (MTD) has changed how you must report to HM Revenue and Customs. But beyond submitting your quarterly returns, the real challenge is knowing exactly which records you need to keep and how to organize them. Getting this wrong can result in penalties, while getting it right protects your business and makes tax time stress-free.

Why Records Matter for Making Tax Digital

Making Tax Digital isn't just about filing returns on time—it's about being able to prove every figure you submit. HMRC expects you to keep records in digital form that clearly show your income, expenses, and tax position. If you can't back up your claims with records, you could face HMRC assessments, challenges, and potentially significant penalties.

The good news? You probably already create most of these records in your day-to-day business. You just need to organize them properly.

Records Every Sole Trader Must Keep

As a sole trader, you need to keep records that show your complete business picture:

Income records: Bank statements, invoices you've issued, receipts for cash payments, and records of any barter or non-cash income.
Expense records: Receipts and invoices for supplies, equipment, professional fees, utilities allocated to your business, insurance, and advertising.
Capital purchases: Evidence of purchases over £500 that you've claimed capital allowances on.
VAT records: If registered, invoices issued and received, with VAT amounts clearly shown.
Mileage logs: If you claim motor expenses, keep records of business journeys, distances, and purposes.
Bank and payroll records: Bank statements, salary records if you pay yourself, and pension contributions.

Keep records for at least six years from the end of the tax year they relate to. This is non-negotiable.

Additional Records for Landlords

If you rent out property, you need everything above, plus property-specific documentation:

Rent records: Evidence of rent received from tenants, including any late or partial payments.
Mortgage and loan statements: To evidence interest you've claimed as an expense.
Maintenance and repair receipts: Invoices for repairs, cleaning, and upkeep.
Council tax, utilities, and insurance: Bills and statements showing you've paid these.
Tenancy agreements: Copies of all rental agreements, particularly if you've negotiated individual terms.
Improvement records: Receipts for property improvements (which may qualify for capital allowances rather than being claimed as expenses).

Keep careful records of what's a repair (claimable as expense) versus what's an improvement (different tax treatment). This distinction matters significantly.

How to Organize Records for Making Tax Digital

Go digital from the start. Take photos or scans of receipts on the day you receive them. Don't wait. Faded receipts become unreadable; digital copies don't.

Use a consistent system. Whether you use spreadsheets, accounting software, or a folder structure on your computer, consistency matters. Label files clearly: "2026 June – Invoices Issued" is better than "June stuff".

Match records to returns. Before you submit your quarterly updates to HMRC, reconcile your records to the figures you're reporting. If your bank statement shows £5,000 income but you've recorded £4,800, find the discrepancy now, not in an audit.

Separate business and personal. A business bank account makes this much simpler. If you must use a personal account, clearly label and file evidence of which transactions are business expenses.

When to Start Keeping Better Records

The answer is: now. If you're not yet organized, the time to fix it is not when HMRC calls. Review what you kept last year, identify gaps, and implement a system today for records going forward. If you've been disorganized, consider working through past records systematically this month.

Many sole traders and landlords find that creating a proper record-keeping system takes just a few hours to set up, then requires only 10–15 minutes each week to maintain.

Getting Guidance on Your Specific Situation

Your exact record-keeping needs depend on your specific business and property arrangements. We've created a detailed guide to help you identify exactly which records matter for your situation: Making Tax Digital at £30,000: What Records Sole Traders and Landlords Should Start Keeping Now. This guide walks through real examples, shows you templates and checklists, and helps you build a system that works for your circumstances.

Take Action Today

Making Tax Digital compliance starts with understanding what to keep and why. The sooner you establish a record-keeping routine, the less stressful tax season becomes. Explore our comprehensive guide to building your record-keeping system today.

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