Definition
Digital records are the business records that Making Tax Digital (MTD) requires to be kept in software rather than on paper. VAT-registered businesses must keep them in “functional compatible software”, which can include spreadsheets used with bridging software. Sole traders and landlords within MTD for Income Tax, which started on 6 April 2026 for qualifying income over £50,000, must also keep digital records of their income and expenses.
What counts as a digital link
When records are spread across more than one program, data must move between them by digital link rather than being retyped. HMRC accepts:
- linked cells or formulas in spreadsheets
- CSV or XML import and export, and file upload and download
- emailing a spreadsheet so it can be imported into other software
- automated or API transfers
HMRC does not treat copy and paste as a digital link.
What must be recorded for VAT
The digital records include the business name, address, VAT number and any VAT schemes used, plus the tax point, net value and VAT rate of each sale, and the tax point, value and input VAT claimed on each purchase. SmartFiling’s guide sets out what HMRC requires for digital records.
Related questions
- What are MTD quarterly updates? Summaries of income and expenses sent to HMRC every 3 months; see MTD quarterly updates explained.
- How do I submit a VAT return under Making Tax Digital? Through compatible software or bridging software; see submitting a VAT return under MTD.
- Which accounting software does SmartFiling work with? Xero, QuickBooks and FreeAgent, used by its bookkeeping service.
Related terms
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Making Tax Digital
Making Tax Digital (MTD) is HMRC's programme requiring businesses to keep digital records and send tax information to HMRC through compatible software.
Read definition -
MTD for Income Tax
MTD for Income Tax (Making Tax Digital for Income Tax) requires sole traders and landlords with qualifying income above a threshold to keep digital records…
Read definition -
VAT return
A VAT return is the report a VAT-registered business sends to HMRC, usually every three months, showing how much VAT it charged on sales (output VAT)…
Read definition
