MTD ITSA Record-Keeping: What to Keep and How Long

Who These Rules Apply To

If you are a sole trader or landlord with qualifying income above £50,000, MTD ITSA has applied to you since April 2026. Those earning above £30,000 join in April 2027. These rules replace the old paper-friendly approach with a requirement to maintain digital records and submit quarterly updates to HMRC through compatible software.

What Digital Records You Must Keep

MTD ITSA does not simply mean scanning paper receipts. HMRC requires specific data to be captured and stored digitally from the point of transaction. Your digital records must include:

• Business income: The date of each sale or payment received, the amount, and a description of the goods or services provided.
• Business expenses: The date, amount, category (such as travel, office costs, or professional fees), and the supplier name for each expense.
• Property income (if applicable): Rental income received per property, dates of payment, and any allowable expenses such as repairs, letting agent fees, and insurance premiums.
• VAT records (if VAT-registered): These must already be kept digitally under MTD for VAT, and the same entries will feed into your MTD ITSA submissions.

You do not need to attach digital copies of every invoice or receipt to your accounting software, but you must be able to produce them if HMRC investigates. Many MTD-compatible apps allow you to photograph receipts and link them directly to transactions, which is best practice.

Records You Must Retain as Supporting Evidence

Alongside your digital transaction records, you should retain the underlying documents that support them. These include sales invoices, purchase receipts, bank statements, mileage logs, and any contracts relevant to your income. Keeping these as digital files — for example, in cloud storage linked to your accounting software — is strongly recommended.

How Long Must You Keep Records?

The standard HMRC retention period for self-employed individuals applies under MTD ITSA:

• Sole traders: Keep records for five years after the 31 January submission deadline for the relevant tax year. For example, records for the 2025/26 tax year must be kept until 31 January 2032.
• Landlords: The same five-year rule applies to property income records.
• If HMRC opens an investigation: You must retain all records relating to that tax year until the enquiry is formally closed, even if this extends beyond five years.

Failing to keep adequate records can result in a penalty of up to £3,000 per tax year under HMRC's record-keeping penalty rules, separate from any penalties for late or inaccurate submissions.

Choosing the Right Software

Your records must be held in HMRC-recognised MTD-compatible software. Spreadsheets can be used but only if bridging software connects them to HMRC's systems — a pure spreadsheet alone is not sufficient. Popular options for sole traders include cloud accounting platforms that allow direct quarterly submissions, automatic bank feeds, and receipt capture. Check HMRC's published list of compatible software before committing to a tool.

Practical Steps to Take Now

• Review your current bookkeeping process and identify any gaps in digital capture.
• Set up a dedicated business bank account if you have not already — this makes digital record-keeping far simpler.
• Connect a bank feed to your accounting software so income and expenses are recorded automatically.
• Create a naming convention for digital receipts and invoices so they are easy to retrieve during an enquiry.
• Back up your digital records regularly, either through cloud storage or an external drive.

MTD ITSA is not just a filing change — it is a fundamental shift in how you manage your finances day to day. Getting your record-keeping right from the start will save you significant time and stress when quarterly deadlines arrive.