Making Tax Digital: Essential Records for UK Traders
Making Tax Digital from April 2027: Records You Must Keep
If you're a UK sole trader or landlord with turnover over £30,000, changes to Making Tax Digital (MTD) requirements from April 2027 will affect how you manage your tax records. Understanding what to keep and how to organize it now will make the transition smooth and help you avoid penalties.
What is Making Tax Digital?
Making Tax Digital is HMRC's initiative to modernize tax administration. Rather than preparing your tax return once a year, MTD requires quarterly updates to HMRC using digital records and software. This means better record-keeping throughout the year, not a scramble in January.
Income Records: The Foundation
Start by keeping detailed records of all business income:
- Invoices sent to clients (with dates and amounts)
- Payment receipts showing when money was received
- Records of any cash sales or services
- Bank statements matching recorded income
Each entry needs a date, description, and amount. The more detailed you are now, the easier your quarterly submissions will be.
Expense Records to Maintain
Keep receipts and records for all business expenses:
- Supplies and materials (invoices and receipts)
- Equipment and tools purchased
- Vehicle costs (fuel, insurance, maintenance)
- Office costs (rent, utilities, internet)
- Professional fees and insurance
- Travel and subsistence
HMRC requires evidence for claimed expenses. A receipt is best; failing that, a bank statement or invoice. For small cash expenses under £20, a record of the amount, date, and purpose is acceptable, but receipts are always safer.
Documentation That Must Be Kept
Beyond day-to-day transactions, maintain:
- Bank statements and building society statements
- Payroll records if you employ staff
- VAT records (if VAT registered)
- Purchase invoices from suppliers
- Your business records policy (how you organize files)
- Any communications with HMRC
HMRC expects to see that you've kept records in line with your normal business practice.
Organizing Records for Digital Filing
MTD works best with organized digital records. Consider:
- Using accounting software that can connect to HMRC
- Storing invoices and receipts electronically (scanned or photographed)
- Creating a folder system by month or category
- Keeping backups of all records in at least two locations
Digital storage makes quarterly filing faster and reduces the risk of losing important documents. Many people find a simple spreadsheet supplemented with scanned receipts works well, while others prefer dedicated accounting software.
How Long to Keep Records
HMRC requires you to keep records for at least six years from the date of transaction or the end of the tax year they relate to, whichever is later. This is a legal requirement, not optional.
Getting Help with Your Setup
Setting up a proper system now saves stress later. A practical guide like our Making Tax Digital records checklist can help you organize exactly what to keep and in what format. Taking time now to establish routines—like processing receipts weekly rather than leaving them until tax season—makes the transition to quarterly filing much easier.
The Benefits of Starting Early
Getting your records in order before April 2027 means:
- Less stress when the new requirements take effect
- Accurate figures for quarterly submissions
- Reduced risk of HMRC penalties
- Easier conversations with accountants or tax advisors
- Better understanding of your business finances throughout the year
Small improvements to your record-keeping now will compound over time. Start by listing what you currently keep and what you're missing, then establish simple routines to capture everything going forward.
Take Action Today
Don't wait until April 2027. Review your current systems, identify gaps, and put new practices in place. Visit our shop for practical guidance on what to keep and how to organize it, so you're ready when Making Tax Digital changes take effect.
Looking for ready-made templates and printables? Browse the shop.
Stay in the loop.
New templates and member-only offers, now and then. No spam. Unsubscribe in one click.