Making Tax Digital for Income Tax: what digital record-keeping actually means

A key part of complying with Making Tax Digital for Income Tax (MTD IT) is keeping digital accounting records — but what does that mean in practice? In this article, the TaxNav team explains what’s required and how to stay on the right side of HMRC.

From April 2026, many people with income from self-employment or property will come under HMRC’s Making Tax Digital for Income Tax (MTD IT) rules.

As part of this, you’ll need to send HMRC a summary – not a detailed list of every transaction – showing your year-to-date income and expenses each quarter, plus a final declaration at the end of the tax year. Another key part of complying with MTD IT is keeping your records digitally, in a format that meets HMRC’s requirements. So what exactly does that involve?

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HMRC doesn’t provide free software

For starters, it’s important to know that HMRC isn't offering free software for MTD IT. Instead, individuals and businesses must choose from a list of recognised software providers to meet the requirements. There won't be a GOV.UK tool for submitting updates or maintaining digital records. That's why it's essential to select a solution, such as TaxNav, that's specifically designed for MTD IT and recognised by HMRC.

Here’s a closer look at what HMRC expects - and how you can stay compliant without overcomplicating things.

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You’ll need to keep a digital record of your income and expenses

MTD IT requires you to keep ongoing digital records of income and expenses for each of your relevant income sources. That means that if you have more than one business, or earn income from properties, each source must be recorded separately.

You can do this using accounting software or a spreadsheet - as long as it’s linked to HMRC using recognised bridging software, such as TaxNav’s. Manual entry of spreadsheet totals or copying and pasting data isn’t allowed.  

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Spreadsheets are still allowed - but only if connected digitally

If you’re used to tracking your figures in a spreadsheet, you can continue to do so - provided it’s submitted through compatible bridging software. TaxNav offers straightforward, compliant Excel templates and bridging software to make this easy.

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Only certain income sources are affected

The MTD IT rules apply to income from self-employment and property if your total gross income from these sources exceeds the current threshold (£50,000 for April 2026/7, £30,000 for April 2027/8).

Income you receive through PAYE- whether from a full-time, part-time, or casual job isn’t included in MTD IT. What does this mean in practice?

Let’s say you work part-time and pay tax through PAYE, but also rent out a room in your home on Airbnb. If the rental income from the Airbnb letting alone is over HMRC's threshold, you'll need to keep digital records and make quarterly year-to-date submissions under MTD IT.

The same applies if, alongside your PAYE job, you run a small online business or services — for example, selling homemade jewellery or providing coaching. If your self-employment income exceeds the threshold, that part of your earnings falls under the MTD IT rules. However, you still don't need to report your PAYE income through MTD IT.

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What HMRC wants to see in your records

To complete your quarterly submissions and annual declaration, your records must include:

• The date of each transaction

• Which trade or property your submission relates to

• The expense category (as defined by HMRC), unless using a consolidated total

• The amount, excluding VAT

Retailers who don’t use digital till software can record daily totals instead of individual sales.

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Quarterly updates are cumulative summaries

Every three months, you’ll need to submit a summary of your year-to-date income and expenses for each income source. This isn’t just a report for that quarter - it’s a running total for the whole tax year up to that point.

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Using different software is possible - but not always practical

You can use one piece of software to send your quarterly updates and another for your final return, though many people will prefer to keep things simple by using a single system. TaxNav supports both submissions in one licence.

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You don’t need to upload receipts

There’s no requirement to attach receipts or invoices to HMRC in your submissions. What matters is that the transaction details are entered correctly and completely into your software. Keeping the original paperwork/digital copy is still a good practice in case HMRC requests supporting evidence later.

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Need help staying compliant with MTD IT?

TaxNav makes digital record-keeping simple. Whether you prefer software or spreadsheets, we offer easy-to-use, HMRC-recognised tools designed specifically for self-employed people and landlords. Taxnav allows you to import your spreadsheets (using our easy add-in template) or key your transactions into the software individually.

Find out more at www.taxnav.digital

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