Making Tax Digital receipt rules: What sole traders and landlords must store

The biggest overhaul to British taxation since the introduction of Self-Assessment in 1996 is underway: Making Tax Digital (MTD).

While MTD for VAT is already mandatory for all VAT-registered entities, HMRC is rolling out Making Tax Digital for Income Tax Self Assessment (ITSA) for millions of sole traders and residential landlords across England, Scotland, Wales, and Northern Ireland.

Understanding what records and receipts you must store digitally is essential to avoid statutory fines.

The MTD for ITSA rollout timeline#

Under the Finance (No. 2) Act 2017 and secondary legislation, MTD for ITSA introduces mandatory digital record keeping and quarterly updates:

• 6 April 2026: Mandatory for self-employed individuals and landlords with total qualifying gross income exceeding £50,000.
• 6 April 2027: Threshold expands downwards to capture anyone with gross income exceeding £30,000.

Note: The threshold applies to gross turnover, not net profit. If a consultant earns £54,000 in revenue with £20,000 in expenses, they exceed the £50,000 threshold and must comply.

What digital records must you keep under MTD?#

Under HMRC regulations, keeping a paper shoebox or a handwritten ledger book will no longer meet the statutory standard.

For every business transaction, you must record digitally in functional compatible software:

1. Date of transaction: The tax point or payment date.
2. Value of expense: Net and gross amounts.
3. Expense category: E.g. travel, advertising, office costs, cost of goods sold.

Do you have to keep paper receipts?#

No.

HMRC has confirmed across VAT Notice 700/21 and MTD guidance that digital photos, scanned PDFs, and electronic receipts are 100% legally recognized:

"You do not need to keep original paper receipts once they are captured into an electronic storage system, provided the digital copy is a complete, legible image of the original."

Once you capture an expense receipt on your phone, you can safely shred the paper original, saving storage space and preventing faded thermal inks from destroying your audit trail.

Quarterly updates vs Annual return#

Under MTD, the traditional 31 January once-a-year tax panic is replaced by four quarterly digital submissions:

Quarter 1 (6 Apr – 5 Jul)   → Submission due 5 August
Quarter 2 (6 Jul – 5 Oct)   → Submission due 5 November
Quarter 3 (6 Oct – 5 Jan)   → Submission due 5 February
Quarter 4 (6 Jan – 5 Apr)   → Submission due 5 May
Final Declaration           → Submission due 31 January following tax year

Quarterly updates contain summary figures of income and expenses, not line-by-line copies of every coffee receipt.

However, during an HMRC compliance check (tax enquiry), HMRC officers will ask to inspect the underlying receipt images that support those summary totals. If an inspector finds that expenses were recorded without corresponding digital receipt images, the expenses will be disallowed under TMA 1970 s. 12B.

Stay audit-ready with an automated receipt vault#

The simplest way to prepare for MTD is to photograph and catalog receipts the moment you make a purchase. Bilbx extracts the date, amounts, VAT breakdown, and merchant details automatically, keeping your digital records compliant with HMRC standards year after year.