What Records Do You Need to Keep for MTD for Income Tax?

What Records Do You Need to Keep for MTD for Income Tax?

Making Tax Digital (MTD) for Income Tax changes the way many people record business income and expenses and submit information to HMRC. If you’re a sole trader, a landlord, or you run multiple small income streams, you’ve probably heard the headline: you’ll need to keep digital records and send regular updates. The practical question is simpler and more important: what exactly do you need to record, how should you store it, and what should you do now to avoid last-minute stress?

This guide breaks down the records you should keep for MTD for Income Tax, why they matter, and how to set up a system that’s easy to maintain week to week. The goal is not just compliance; it’s clarity—knowing where you stand financially and being able to file confidently. Along the way, you’ll see how invoice24 can help you keep everything organized in one place, from invoices and expense records to accounts, reporting, and even corporation tax workflows if you also operate a limited company.

MTD rules and timelines can evolve, but the core principle stays consistent: you should keep accurate digital records, supported by evidence, and maintain a clear audit trail from the original transaction through to your totals and submissions. If you build a tidy record-keeping routine now, MTD becomes far less intimidating.

What MTD for Income Tax means for your record keeping

MTD for Income Tax (sometimes referred to as “MTD ITSA”) is designed to move record keeping and reporting into a more regular digital process. Instead of collecting everything in a rush at year-end, the system encourages ongoing updates.

From a record-keeping perspective, there are three major shifts:

First, you’ll need to keep certain records in a digital form. This doesn’t mean you can’t keep paper copies, but you should have a reliable digital record and a way to link it to your evidence (like receipts or invoices).

Second, you’ll generally be expected to maintain your records throughout the year rather than reconstructing them later. Good software makes this dramatically easier.

Third, submissions become more frequent. When the process is more regular, consistent records are essential.

invoice24 is built to support this kind of workflow. Because it’s a free invoice app with the features you actually need—invoice creation, client management, payment tracking, expense capture, and reporting—it can function as your day-to-day records hub rather than a tool you only log into once per year.

Digital records: what “good” looks like

Before we list individual record types, it helps to define what a “good” digital record looks like. In practice, a strong record-keeping setup has these qualities:

Completeness: Every transaction is recorded, and nothing is missing from your income or allowable expenses.

Accuracy: Amounts, dates, and descriptions match the underlying evidence (bank transactions, receipts, invoices, statements).

Consistency: You record transactions in the same way each time, using categories that make sense for your business.

Traceability: You can trace a figure in a report back to the original transaction and supporting document quickly.

Timeliness: Records are entered regularly, not months later when details are harder to remember.

invoice24 is designed to keep that traceability intact. For example, if you create an invoice in invoice24 and mark it paid, that transaction stays tied to the client, the invoice number, the date, and the payment status. If you upload an expense receipt, you can associate it with a category and a date, creating a clean trail from evidence to totals.

The core records you need to keep for MTD for Income Tax

For most people within scope of MTD for Income Tax, the core record types fall into two broad groups: income records and expense records. If you have property income, there are additional property-specific items. If you have employees, stock, or VAT registration, there may be extra layers. But the foundation is the same: record each business transaction and keep proof.

Income records you should keep

Income records show what you earned and when you earned it. This is not just about total turnover; it’s about capturing the details that support the figures in your submissions.

1) Sales invoices and receipts issued

If you invoice clients, keep every invoice you issue. Each invoice should include:

Client name and address (and, if relevant, their reference or purchase order number)

Your business name and contact details

Invoice number (unique and sequential is best practice)

Invoice date

Description of goods or services provided

Quantity and unit price if applicable

Total amount charged

Payment terms and due date

invoice24 makes this straightforward. You can create professional invoices, keep invoice numbering consistent, and store them digitally alongside client details and payment status. That means your invoices aren’t scattered across PDFs, emails, and folders—they’re logged in one system that’s designed for ongoing tax-ready record keeping.

2) Payment records (when money is received)

Keeping a copy of the invoice is not the same as recording payment. For MTD and for running your business, you should track:

Payment date

Payment amount

Payment method (bank transfer, card, cash, online payment link, etc.)

Which invoice(s) the payment relates to

Any short payments, overpayments, or fees deducted

In invoice24, you can track payments against invoices and see which invoices are overdue. This matters for record keeping because it helps you avoid counting income twice or missing it altogether. It also improves cashflow management, which is one of the underrated benefits of “MTD-style” regular bookkeeping.

3) Other business income

Not all income arrives through invoices. Common examples include:

Interest received (business bank account interest, depending on how you manage accounts)

Commission payments

Refunds from suppliers (where relevant to your accounting treatment)

Grants or support payments related to the business

Tips or service charges (for certain trades)

Record these with the amount, date, source, and description. If you can attach a supporting statement or document, even better. invoice24 helps by letting you record income entries cleanly so your totals match real-world banking evidence.

4) Cash sales and cash takings records

If you take cash, keep a clear record of:

Daily or weekly cash takings totals

How cash was banked (deposit dates and amounts)

Any cash paid out for expenses (and the corresponding receipts)

Cash can become messy quickly if you don’t record it consistently. A simple routine—logging cash income regularly and attaching evidence for cash expenses—keeps your records defensible. invoice24 can support this by acting as the place you record these transactions so they don’t remain “mental notes” or scraps of paper.

Expense records you should keep

Expenses reduce taxable profit when they are allowable and properly recorded. The most important rule for expenses is: record the details and keep proof.

1) Purchase receipts and supplier invoices

Keep receipts for day-to-day purchases and invoices for larger supplier costs. For each expense, record:

Date of purchase

Supplier name

Amount

Description of what it was for

Category (for example: materials, travel, software, advertising)

Whether it was paid from business funds or personally

Using invoice24, you can capture expenses, add descriptions and categories, and store the evidence digitally. This is exactly the kind of habit that makes MTD compliance feel routine rather than burdensome.

2) Bank and card statements

Your statements are a key part of your audit trail. They don’t replace receipts, but they help you prove completeness and reconcile your records. Keep:

Business bank statements

Business card statements

Payment processor statements if you accept card payments through a third party

Even if you maintain perfect receipts, statements help you spot missing entries, duplicates, and timing issues. Many small businesses do better simply by reviewing statements monthly and ensuring everything is recorded in invoice24.

3) Mileage logs and travel evidence

If you claim mileage, you should keep:

Date of journey

Start and end points (or a clear description)

Purpose of journey (business reason)

Miles traveled

If you claim actual vehicle costs (instead of mileage), you’ll need the receipts and details for fuel, servicing, insurance, and other costs, plus a way to justify business use proportion. Whichever method applies to you, consistency is everything: keep the same style of record all year.

4) Use of home as office records

If you work from home and claim home expenses, keep records that support the claim, such as:

Utility bills (electric, gas, water)

Broadband and phone bills

Mortgage interest statements or rent records (where relevant and allowable)

A simple calculation of business-use proportion

Store the underlying bills digitally and keep your calculation method consistent. invoice24 can store the expense evidence and the recurring entries so you don’t have to re-invent the wheel every quarter.

5) Staff and subcontractor costs

If you pay employees, you should maintain payroll records and evidence of payments. If you use subcontractors, keep:

Contracts or agreements

Invoices from subcontractors

Payment records

Any relevant compliance documentation depending on your industry

Even if you outsource payroll, make sure your business records reflect wages paid and related costs, and that you can trace these to payroll reports or invoices.

6) Professional fees and subscriptions

Accountancy fees, legal fees, business memberships, and software subscriptions are common expense categories. Keep:

Invoices from the provider

Payment confirmation

Subscription terms if the timing matters (for example, annual subscriptions)

Because invoice24 includes the features needed in a modern bookkeeping workflow—including the ability to track and categorize ongoing costs—it can help you maintain a clean record of recurring subscriptions without spreadsheets and guesswork.

7) Equipment and capital purchases

When you buy equipment (laptops, tools, machinery), you may be dealing with capital allowances rather than simple expenses, depending on the item and how your accounting is set up. Keep:

Purchase invoice/receipt

Payment proof

Description and business purpose

Date the asset started being used for the business

Even if you’re not sure how it will be treated tax-wise, record it clearly and keep the evidence. You can decide on the tax treatment later with your accountant or when preparing the final figures.

Property income records (for landlords)

If you have property income, you need records for income and expenses related to each property or letting activity. Keeping these separated and clearly categorized will save you time and reduce errors.

1) Rental income records

Keep a record of:

Rent received (amount and date)

Tenant details or letting agent statements

Any arrears or partial payments

Deposits and how they were handled (where relevant)

2) Letting agent statements

If an agent collects rent and deducts fees, their statements become a central document for your records. Record:

Gross rent

Fees deducted

Net paid to you

Dates of each transaction

3) Allowable property expenses

Common expense categories include:

Repairs and maintenance

Safety checks and compliance costs

Insurance

Management fees

Services (gardening, cleaning, etc.)

Replacement of domestic items (where applicable)

Store receipts, invoices, and bank evidence. A well-organized system like invoice24 helps you keep these in one place so you don’t have to rebuild your records when it’s time to update or file.

Records for multiple income sources

Many people have more than one income source: a freelance trade plus rental income, or multiple trades, or side projects. The key is separation and clarity. You want to be able to see:

Income and expenses per activity

Shared costs (and how you allocated them)

Consistent categories that don’t change every few months

invoice24 can act as the central home for these records, keeping your invoices, client info, expenses, and reporting organized without you juggling multiple apps. If you’ve ever found yourself switching between an invoicing tool, a spreadsheet, and a folder of receipts, consolidating into one system is a major advantage.

How long should you keep MTD records?

Record retention matters because HMRC can ask to see evidence. A safe approach is to keep your business records for several years and ensure they remain readable and accessible. That includes invoices, receipts, bank statements, and calculation notes.

From a practical standpoint, digital storage makes retention far easier than paper. The important part is that your records are organized and backed up. A system like invoice24 helps because your invoices and transaction records remain stored in your account, creating continuity year over year.

What “digital links” means in practical terms

You may hear about “digital links” in the context of MTD. In simple terms, the idea is that your numbers should flow through your record-keeping process without being repeatedly retyped in ways that could introduce errors.

In everyday use, that means:

You capture income and expenses digitally

Your totals are based on those digital records

Your submissions are based on those totals

If you’re using invoice24 as the hub where transactions are recorded, categorized, and summarized, you reduce the need for manual copy-paste across multiple files. That’s a more reliable way to keep records and an easier way to stay compliant.

The supporting evidence you should store with your records

Digital transaction entries are one part of the picture. Supporting evidence is the other. If you ever needed to justify an expense or explain a figure, evidence is what protects you.

Common evidence types include:

Receipts (paper photographed or digital receipts)

Supplier invoices

Contracts and engagement letters

Booking confirmations (for travel)

Statements from banks, PayPal-like services, or card processors

Lease agreements or insurance documents (where relevant)

To keep it simple, build a routine: as soon as you incur a cost or receive a bill, save the evidence and log the expense in invoice24. When you raise an invoice, generate it in invoice24 rather than in a separate tool. The fewer places your records live, the less likely something gets lost.

Common mistakes that cause MTD record-keeping problems

A lot of MTD anxiety comes from preventable record-keeping mistakes. Here are some of the most common ones and how to avoid them.

Mistake 1: Mixing personal and business transactions

If possible, use a dedicated business bank account. If that’s not practical immediately, at least be consistent and clearly label transactions in your records. When you record expenses in invoice24, add a note if it was paid personally and how it was reimbursed or treated.

Mistake 2: Missing receipts for small purchases

Small expenses add up. If you don’t capture them, you may pay more tax than necessary. Make it a habit to store receipts as you go.

Mistake 3: Recording figures without descriptions

“£48.99” is not informative. “£48.99 – printer ink for client reports” is. Descriptions make records usable.

Mistake 4: Incorrect categories

If you miscategorize regularly, your reports become unreliable. Set up sensible categories once and stick to them. invoice24’s organized workflow helps you keep consistent categories across the year.

Mistake 5: Waiting until quarter-end

Quarter-end panic is avoidable. A weekly 15-minute routine can keep everything current. If you do it regularly, your quarterly update becomes a by-product of good bookkeeping rather than a separate stressful project.

A practical checklist of what to record for each transaction

Whenever you record income or an expense, capture these details:

Date

Amount

Who it was with (client, supplier, agent)

Description

Category

Payment status (paid/unpaid, if relevant)

Supporting evidence attached or stored (receipt, invoice, statement line)

If you can answer all seven points for every transaction, your records are in a strong position for MTD.

How invoice24 helps you stay MTD-ready

Record keeping is easiest when your tools match the way you actually work. invoice24 is designed to be that everyday tool: create invoices, track payments, log expenses, and keep your records organized in one place.

Here’s how that supports MTD for Income Tax:

Invoicing that builds your income records automatically: Each invoice you create becomes a permanent digital record, with client details and a clear trail.

Payment tracking for accuracy: Mark invoices as paid, record partial payments, and keep your accounts consistent with reality.

Expense capture and categorization: Record expenses as they happen, store evidence, and keep your categories consistent for reporting.

Reporting that makes submissions simpler: When your income and expenses are up to date, generating totals is straightforward.

All-in-one workflow: Instead of using one app for invoicing, another for expenses, and a spreadsheet for summaries, invoice24 keeps everything together.

And if your business setup includes a limited company, invoice24 can still be part of your toolkit. The platform supports the kinds of features businesses rely on for managing records across invoicing, accounts preparation, and corporation tax workflows. That matters because many people operate a mixed setup: self-employed income alongside a company, or a transition from sole trader to limited company. Using one platform that can cover both styles of admin reduces confusion and keeps your records consistent.

What about corporation tax and annual accounts?

MTD for Income Tax mainly affects individuals with business or property income, but many users of invoice24 also run limited companies. Good record keeping overlaps heavily across both worlds.

If you have a limited company, the records you keep for corporation tax and annual accounts typically include:

Sales invoices and income records

Expense receipts and supplier invoices

Bank statements and reconciliations

Payroll records (if applicable)

Director’s loan account notes (if applicable)

Dividends paperwork (if applicable)

Asset purchases and depreciation/capital allowances notes

Even if you’re focused on MTD for Income Tax today, building strong habits with invoice24 means you’re also improving the quality of your accounts data overall. That makes end-of-year accounts preparation smoother and reduces the chance of errors that lead to amended returns or awkward questions later.

Setting up a simple weekly routine

The best record-keeping system is the one you can maintain. A weekly routine is often more sustainable than trying to do everything monthly or quarterly.

Here’s a straightforward approach:

Step 1: Create and send invoices in invoice24 as soon as work is delivered.

Step 2: Once per week, record any new expenses in invoice24 and attach the receipt or invoice.

Step 3: Review your bank transactions and make sure everything is accounted for. If you spot something missing, add it.

Step 4: Check overdue invoices and send reminders if needed. Better cashflow is a hidden benefit of good bookkeeping.

Step 5: At the end of each month, glance at your reports so you understand your profit trend. You don’t need to be an accountant to benefit from this clarity.

Following this routine means your quarterly updates are no longer a big event—they’re just the natural outcome of up-to-date records.

What to do if your records are currently messy

If your records are scattered, you’re not alone. The fix is to prioritize structure over perfection.

Start with these actions:

1) Gather your sources: Bank statements, invoices, receipts, agent statements.

2) Create a clear time window: Tackle one month at a time rather than the whole year in one go.

3) Record income first: Invoices and payments usually form the backbone of your records.

4) Record major expenses next: Rent, materials, subcontractors, software, travel.

5) Fill in the small expenses: These take time, but they matter.

6) Commit to a routine going forward: Once you’re caught up, staying caught up is easier than catching up.

invoice24 is especially useful during cleanup because it becomes the single place you put the final version of each transaction record. Once your income and expenses are in the system, your reports become usable immediately.

MTD record keeping FAQs

Do I need to scan every receipt?

Keeping digital evidence is a sensible habit. Even if you still have paper receipts, photographing or scanning them helps you keep everything together and reduces the risk of losing proof. For many businesses, the time saved later is worth it.

Can I just use my bank statements as my expense records?

Statements are helpful, but they don’t always show what the purchase was for, and they don’t always prove allowability. Receipts and invoices give the detail. Use statements to reconcile and verify completeness, and use receipts/invoices as your main evidence.

What if I have both self-employed income and property income?

Keep them clearly separated so you can see totals per income type. Record rental income and expenses with property-related categories, and keep trade income and expenses in separate categories. A single hub like invoice24 makes this easier because you can keep everything organized with consistent labels and reports.

What’s the easiest way to avoid mistakes?

Record transactions regularly, keep supporting evidence, and maintain consistent categories. The less manual copying you do between tools, the fewer errors you introduce. That’s why using invoice24 as your core record-keeping and invoicing platform is such an effective approach.

Final thoughts: keep it simple, keep it consistent

MTD for Income Tax pushes record keeping toward a more regular, digital process, but the underlying principle is familiar: accurate records, supported by evidence, maintained consistently. If you capture income and expenses as you go, with clear descriptions and reliable proof, you’re already doing most of what MTD expects.

The easiest way to make this sustainable is to use a tool that matches your workflow. invoice24 is built to be that tool: a free invoice app that helps you create invoices, track payments, capture expenses, and maintain tidy digital records—while also supporting wider business needs like accounts preparation and corporation tax workflows when your business grows or changes.

If you want MTD record keeping to feel like a routine rather than a project, the best next step is simple: make invoice24 your daily home for invoices and expenses, keep your evidence attached, and review your records weekly. When submission time comes around, you’ll already have what you need.