What is Digital Records for Tax?

Digital records for tax purposes are business records kept in an electronic format that satisfies HMRC's requirements under Making Tax Digital (MTD). They replace the traditional paper-based record keeping and manual submissions.

What HMRC requires you to keep digitally:

For VAT: - Your business name, address, and VAT number - The VAT scheme you use (standard, flat rate, cash accounting, etc.) - For each sale: date, net value, VAT rate applied, and VAT amount - For each purchase: date, net value, VAT rate, and VAT amount - Summary totals for each VAT return period

For Income Tax (from 2026): - All business income and expenditure - Categorised by type (sales, expenses, capital allowances) - Quarterly summaries submitted to HMRC - End-of-period statement and final declaration

Digital links: HMRC requires that data flows digitally between software. You cannot print data from one system and manually type it into another. Acceptable digital links include: - CSV or Excel file imports/exports - API connections between software - XML or other electronic data transfers

What you can still keep on paper: - Invoices and receipts can still be received in paper form - However, the summary data from those documents must be entered into your digital record-keeping software - You do not need to scan or photograph paper documents (though it's good practice)

Choosing software: HMRC publishes a list of MTD-compatible software. Options range from full accounting packages (Xero, QuickBooks, FreeAgent) to bridging software that connects spreadsheets to HMRC's systems.