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.
• 6 April 2028: Threshold drops again, to £20,000.

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's record-keeping notice for VAT puts it directly:

"If the image is retained and contains all the detail required for VAT purposes, the business does not need to keep the original invoice, unless it's required for another purpose."

— Record keeping (VAT Notice 700/21)

So once you capture an expense receipt on your phone, the paper original can usually be shredded, saving storage space and preventing faded thermal inks from destroying your audit trail.

Note the qualifier in HMRC's own wording — unless it's required for another purpose. A few documents must be kept in their original form regardless: the notice gives the C79 import VAT certificate as its example.

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 7 August
Quarter 2 (6 Jul – 5 Oct)   → Submission due 7 November
Quarter 3 (6 Oct – 5 Jan)   → Submission due 7 February
Quarter 4 (6 Jan – 5 Apr)   → Submission due 7 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. TMA 1970 s. 12B is what obliges you to have kept them; if an expense cannot be evidenced when asked about, HMRC can correct the return and disallow it.