Making Tax Digital Record Keeping: What Landlords Must Keep and How

What are the digital record keeping requirements under Making Tax Digital?

Under MTD, every income and expense transaction must be recorded digitally, in a system capable of communicating with HMRC's API. You must record the date, amount, and category of each transaction. Records must be in place from the very start of your first MTD tax year — you cannot start mid-year and backfill.

The core requirement is straightforward: each time money comes in or goes out of your rental business, you record it digitally. That means:

• Rent received from each property — date and amount
• Each expense paid — date, amount, and what category it falls into
• Which property each transaction relates to (if you have more than one)

What "digitally" means in practice is that this data must live in a system that can either submit directly to HMRC (dedicated MTD software) or be passed to HMRC via bridging software. A Word document with a list of payments is not a digital record for MTD purposes. A structured entry in accounting software is.

The start date matters enormously. HMRC requires digital records from the beginning of the tax year in which you become mandated. For landlords entering MTD in April 2026, that means 6 April 2026 is day one. You cannot start keeping digital records in June 2026 and claim that covers the full first quarter — you would have a gap that makes your Q1 submission incomplete.

This is a common preparation mistake. Landlords spend February and March 2026 choosing software and assume they can begin in May once they are set up. In fact, they need to be ready to capture transactions from the moment the new tax year begins.

What exactly counts as a "digital record" for Making Tax Digital?

A digital record is a structured entry in an MTD-compatible system containing at minimum the date of the transaction, the gross amount, and the category. HMRC does not require digital copies of supporting documents like receipts — just the transaction record itself.

What HMRC requires you to record digitally:

The key distinction: HMRC requires the record of the transaction to be digital, not the evidence for the transaction. A paper receipt is fine as your underlying documentation — what matters is that the transaction itself is captured in your digital system.

This is good news for landlords who have invested in filing systems, lever arch folders, or receipt boxes. You do not need to dismantle your existing physical documentation approach. You simply need to ensure that every time you file something in that folder, you have also entered the transaction in your digital records.

Does Making Tax Digital require digital receipts?

No. HMRC explicitly does not require landlords to digitise receipts, scan invoices, or photograph every expense. The digital record requirement applies to the transaction entry — date, amount, category — not to the supporting documentation.

This is one of the most common misconceptions about MTD. People imagine they will need to photograph every plumber's invoice and upload it to HMRC. That is not the case. HMRC's requirement is for structured transaction data, not document storage.

That said, many landlords choose to photograph receipts and attach them to transactions in their accounting software. There are good reasons to do this:

• It creates a single searchable record linking the transaction to its evidence
• Paper receipts fade over time; photographs are permanent
• If HMRC opens an enquiry, having documents readily accessible saves significant time
• Modern software makes this quick — take a photo with your phone and it attaches automatically

But if you prefer to keep physical receipts in a folder and only enter the transaction data digitally, that is fully HMRC-compliant. The digital record and the physical evidence can live separately. You just need to be able to produce the physical evidence if asked.

Retention requirement for receipts and invoices: Keep all supporting documentation (physical or digital) for at least five years after the 31 January Self Assessment deadline for that tax year. For 2026/27 records, that means keeping everything until at least 31 January 2033.

What software counts as digital record keeping for Making Tax Digital?

You need software from HMRC's MTD recognised list — dedicated MTD software, general accounting software with MTD compliance, or a spreadsheet combined with HMRC-approved bridging software. Cloud storage alone does not count.

HMRC publishes a list of recognised MTD for Income Tax software on gov.uk. As of 2026, the options broadly fall into four categories:

1. Landlord-specific MTD platforms

Built specifically for property businesses. These typically offer property-by-property tracking, tenancy management, and income/expense categorisation tailored to rental accounting.

• LandlordOS — property management with MTD integration, free for 1-2 properties
• Hammock — accounting-focused, designed for landlords
• Landlord Vision — established landlord software with accounts module

2. General accounting software with MTD support

These are primarily designed for businesses but work well for landlords with multiple properties or complex affairs.

• QuickBooks — widely used, strong bank integration
• Xero — popular with accountants, good for landlords with accountant oversight
• Sage — comprehensive, well-established
• FreeAgent — user-friendly, HMRC-owned

3. Spreadsheet with bridging software

If you maintain records in Microsoft Excel or Google Sheets, you can continue to do so — but you must use bridging software to submit your quarterly updates to HMRC. The bridging software reads your spreadsheet and sends the data to HMRC's API in the correct format.

4. What does NOT count

• Google Drive, Dropbox, or any cloud storage folder — not structured data
• A Word document or PDF listing transactions — not submittable to HMRC
• A standalone spreadsheet with no bridging software connection — cannot submit to HMRC
• Paper records of any kind — not digital

What is bridging software for Making Tax Digital?

Bridging software sits between your spreadsheet and HMRC's MTD API. You maintain your records in Excel or Google Sheets as normal, and the bridging software reads your spreadsheet and submits the data to HMRC in the required format.

Bridging software is explicitly recognised by HMRC as a valid approach to MTD compliance. It was introduced specifically to allow taxpayers who are comfortable with spreadsheets to continue using them without completely overhauling their record-keeping system.

How bridging software works in practice:

1. You maintain your rental income and expense records in your existing spreadsheet
2. Your spreadsheet must be in a specific format that the bridging software can read (usually a defined set of cells or a template)
3. When a quarterly update is due, you open the bridging software
4. The bridging software connects to your spreadsheet (via upload or direct link)
5. It formats your data and submits it to HMRC's API
6. You receive a submission reference confirming HMRC received it

Advantages of the bridging approach:

• Minimal change to your existing workflow if you are comfortable with spreadsheets
• You remain in control of your own data in a format you understand
• Often cheaper than full accounting software

Disadvantages:

• More manual steps than using integrated software — you must remember to run the bridging submission
• Spreadsheet formatting errors can cause submission failures — your template must match exactly what the bridging software expects
• No bank feed integration in most bridging solutions — you still enter every transaction manually
• No automatic tax calculations or estimates of your liability
• If HMRC changes its requirements, you may need to update your spreadsheet template

For landlords with a small portfolio and a well-organised spreadsheet they have used for years, bridging software is a reasonable MTD solution. For anyone managing three or more properties, the time saving of purpose-built software generally outweighs the cost.

Making Tax Digital record keeping for landlords with multiple properties

HMRC treats all UK residential property income as a single business — you submit one set of quarterly updates covering all properties combined. However, you should maintain property-level records internally to track income and expenses correctly.

The single UK property business concept means that for MTD submission purposes, you aggregate your income and expenses across all properties. You do not submit separate returns for each property. However, behind the scenes, you need property-level records to:

• Allocate expenses correctly to the right property (essential for accuracy)
• Understand which properties are profitable and which are not
• Produce accurate accounts if you sell a property (capital gains calculations require property-level records)
• Respond to any HMRC enquiry that focuses on a specific property

Most MTD-compatible software provides property-level tracking as standard. You enter each transaction against a specific property, and the software automatically aggregates the totals for submission. This is by far the easiest approach — the aggregation happens automatically without you needing to do manual calculations.

If you are using a spreadsheet with bridging software, you should maintain separate tabs or sections for each property and then use a summary tab that combines the totals for submission. Keeping everything on a single tab quickly becomes unmanageable with multiple properties.

Recommended spreadsheet structure for multiple properties:

What categories should landlords use for Making Tax Digital records?

HMRC uses standard categories for property income and expenses. You must categorise each transaction into one of these categories for your quarterly updates. Good software handles categorisation automatically or with minimal prompting.

Income categories:

Allowable expense categories:

What is NOT included in quarterly expense records:

• Capital expenditure (improvements that add value — new extension, loft conversion, kitchen replacement that upgrades rather than replaces like-for-like). These are claimed at year-end via your End of Period Statement, not in quarterly updates.
• Deposits received from tenants — these are not income; they are liabilities held on trust
• Capital repayments on your mortgage — only the interest element is an allowable expense

The distinction between a repair and a capital improvement is one of the most common areas of confusion. A like-for-like boiler replacement is a repair; a new boiler with significantly improved specification might be capital expenditure. When in doubt, note the distinction in your records and clarify with your accountant at year-end.

How long do you need to keep Making Tax Digital records?

You must keep digital records for at least five years after the 31 January Self Assessment deadline for the relevant tax year. For the 2026/27 tax year, records must be kept until at least 31 January 2033.

This is the same retention requirement as the existing Self Assessment record-keeping rules — MTD has not changed the timescales. What has changed is the format: records must be digital, not paper.

Retention timeline:

If HMRC opens an enquiry into a particular tax year, you may be required to retain records for longer — until the enquiry is closed. Most enquiries are resolved within 12-18 months of opening, but some complex cases take longer.

The practical implication: do not delete your digital records after the tax year is over. Keep them in your software for at least five years. If you change software provider, export your records before closing your old account and store them securely. A CSV export is sufficient as long as it contains all the required data.

Common Making Tax Digital record keeping mistakes to avoid

The most common mistakes are missing transactions, miscategorising expenses, recording deposits as income, and starting records part-way through a tax year. All of these create problems at the quarterly submission stage.

1. Missing transactions

The most frequent issue. A tenant pays rent in cash, or you pay a contractor in cash, and it never makes it into your digital records. Under MTD, your digital records are your official records. If a transaction is not in there, it did not happen as far as HMRC is concerned. Establish a habit of entering every transaction within 24-48 hours of it occurring — or set up bank feeds so transactions import automatically.

2. Miscategorising capital improvements as repairs

A new kitchen fitted like-for-like is a repair. A kitchen that significantly upgrades the property beyond its previous standard may be a capital improvement. Misclassifying capital expenditure as repairs and claiming it in quarterly updates overstates your allowable expenses and underpays your tax. The correct treatment is to record capital items separately and claim them at year-end when your accountant can advise on the appropriate relief.

3. Recording deposits as income

Security deposits are held in trust for the tenant and must be returned at the end of the tenancy. They are not rental income. Recording a deposit payment as income inflates your income figures and your tax bill. Most MTD software has a separate category for deposits — use it.

4. Starting records mid-year

If you become MTD-mandated from April 2026, your records must cover the entire 2026/27 tax year — from 6 April 2026. Starting in June or July creates a gap that makes your first quarterly update incomplete and potentially incorrect. Be ready from day one.

5. Mixing personal and rental expenses

If you pay for property-related items on a personal credit card or bank account, ensure those transactions are also captured in your rental records. The transaction needs to be recorded regardless of which bank account the money came from.

6. Not recording rental income received in advance

Under cash basis (which most individual landlords use), you record income when received — not when it was earned. If a tenant pays three months in advance in April, you record all three months' rent in April. Under accruals basis, you would apportion it differently. Know which basis you are using and apply it consistently.

7. Ignoring mortgage interest categorisation

Section 24 restricts the mortgage interest deduction for individual landlords — the interest is no longer a direct deduction but is instead replaced by a basic rate tax credit. Many landlords still record the full mortgage interest as an expense in their accounts, which is incorrect for tax purposes. Your software should handle the Section 24 treatment automatically, but verify this before submitting your first update.

Making Tax Digital record keeping and cash-basis landlords

Most individual landlords use the cash basis for property income — recording income when received and expenses when paid. This is the default for most taxpayers with gross income below £150,000 and is simpler than the accruals basis.

Under the cash basis:

• Record rent when you receive it (not when it falls due)
• Record expenses when you pay them (not when the invoice is raised)
• If a tenant pays two months' rent in one payment, record the full amount on the day received

The accruals basis is more complex and is typically used by landlords with accountants or those with very large portfolios. Under accruals, income is recognised when it accrues (when rent falls due) rather than when cash changes hands. Most MTD software supports both bases — ensure your software is set to the correct one for your circumstances.

If you have been using one basis in your Self Assessment returns, continue using the same basis under MTD. Switching from cash to accruals (or vice versa) creates timing differences that need careful management at the year-end — speak to your accountant before making any change.

Step-by-step: How to get started with MTD digital records

1. Choose your software. Review HMRC's recognised software list. For most landlords, a dedicated landlord platform like LandlordOS offers the best balance of simplicity, property-specific features, and MTD compliance. If you are committed to spreadsheets, choose bridging software that supports your format.
2. Set up your properties. Create a record for each property — address, ownership type (sole ownership, joint ownership), and any relevant details. Most software asks for this during onboarding.
3. Configure your income and expense categories. Check that your software uses HMRC's standard categories. You do not want to discover at quarterly submission time that your "maintenance" category maps to something HMRC doesn't recognise.
4. Connect your bank account. If your software supports bank feeds, connect your rental bank account. This automatically imports transactions and reduces manual entry significantly. Review and categorise imported transactions regularly rather than leaving a backlog.
5. Start from 6 April 2026. Do not start earlier (unless you are enrolling voluntarily and want to capture earlier periods). Do not start later. Day one of your MTD obligation is day one of your digital records.
6. Establish a weekly habit. Spend 15-20 minutes each week reviewing your records — confirm imported transactions are correctly categorised, add any cash transactions manually, check for anything that looks unusual. Weekly maintenance prevents quarterly pile-ups.
7. Submit your first quarterly update by 5 August 2026. This covers the period 6 April to 5 July 2026. In your first year, HMRC has confirmed a soft landing — no penalty points for late updates. But getting into the rhythm of submitting on time from the start is the right approach.