Digital Record-Keeping Requirements

Making Tax Digital requires you to create and store digital records of your property income and expenses using MTD-compatible software. This replaces the traditional approach of keeping paper records or spreadsheets and entering everything at the end of the tax year.

This article explains HMRC's digital record-keeping rules — what counts as a digital record, what you must record, how long to keep records, and how Provestor meets these requirements.

For practical guidance on how to keep records in Provestor, see Introduction to record keeping.

What HMRC requires

Under Making Tax Digital for Income Tax, you must:

  • Create digital records of all property income and expenses using MTD-compatible software
  • Store these records digitally throughout the tax year and for the required retention period
  • Keep supporting documents (receipts, invoices, bank statements) that back up your digital records
  • Submit quarterly updates generated from your digital records

You or your agent are responsible for maintaining these records. HMRC can check your records to ensure you're paying the right amount of tax, and may apply penalties if your records are incomplete, inaccurate, or not kept for the required period.

See HMRC's guidance on creating digital records for the official requirements.

What counts as a digital record

A digital record is a record of income or expense that's created and stored using MTD-compatible software.

Digital records include:

  • Income and expense transactions entered into your MTD software
  • Categorised bank transactions imported from statements
  • Letting agent data uploaded to your software
  • Any other income or expense data stored in MTD-compatible format

What doesn't count:

  • Spreadsheets (Excel, Google Sheets, etc.) — these aren't MTD-compatible unless connected via bridging software
  • Paper records alone
  • Photos of receipts stored outside MTD software (though you still need to keep the originals or copies)

MTD-compatible software like Provestor creates digital records automatically as you add transactions. Each transaction you enter or import becomes a digital record that HMRC recognises for compliance purposes.

What you must record

You must create digital records of all property business income and expenses during the tax year.

Income records must include:

  • Rental income received from tenants
  • Letting agent receipts (gross income, not just net payments)
  • Other property income (e.g., insurance payouts for lost rent)

Expense records must include:

  • Allowable expenses paid (repairs, insurance, agent fees, etc.)
  • Residential finance costs (mortgage interest and arrangement fees)

For each record, you need:

  • Amount and date
  • Category (type of income or expense)
  • Which property it relates to

HMRC provides detailed categories for income and expenses in the Making Tax Digital for Income Tax update notice. Provestor's expense categories align with HMRC's requirements. See Which category should I use? for categorisation guidance.

Simplified record-keeping for certain landlords

HMRC allows some simplifications depending on your circumstances:

Turnover below the VAT threshold

If your property income is below the VAT registration threshold (£90,000 for 2025/26), you can choose to record just total income and total expenses instead of detailed categories. However, mortgage interest must still be recorded separately.

In practice, this saves little time for most landlords — you still need to separate out mortgage interest and identify capital spending. Provestor's AI makes categorisation fast enough that the detailed approach is usually simpler and more accurate.

Jointly owned properties

If you own property jointly with others, HMRC allows you to record income quarterly but delay recording expenses until the final declaration at year end.

Provestor supports full quarterly record keeping for joint properties — you enter the complete transaction, and the app automatically applies your ownership percentage and submits the correct figures. This gives you more accurate quarterly projections and avoids reconstructing expenses at year end. See HMRC's digital record-keeping notice for details on these easements.

Supporting documents you must keep

Digital records in your MTD software don't replace the need to keep original documents or copies. You must still keep supporting evidence that backs up your records.

HMRC expects you to keep:

  • Receipts for expenses claimed
  • Invoices from suppliers and contractors
  • Bank statements showing income received and expenses paid
  • Letting agent statements (if applicable)
  • Mortgage statements showing interest charged
  • Records of mileage for property-related journeys

These can be kept digitally (scanned PDFs, photos) or as paper originals. What matters is that you can produce them if HMRC checks your records.

How long to keep records

You must keep your digital records and supporting documents for at least 5 years after the 31 January tax return deadline for each tax year.

Example:

  • Tax year 2024/25 ends on 5 April 2025
  • Final declaration deadline is 31 January 2026
  • Keep records until at least 31 January 2031

This applies to both your digital records in Provestor and your supporting documents (receipts, invoices, statements).

HMRC can charge penalties if you don't keep records for the required period or if your records are incomplete or inaccurate. They may also check your records during this period to ensure you've paid the right amount of tax.

See HMRC's guidance on keeping records for rental income for full details on retention requirements.

Paper records under MTD

Making Tax Digital doesn't prohibit paper records — but it does require you to also maintain digital records in MTD-compatible software.

In practice, this means:

  • You can keep paper receipts and invoices as supporting documents
  • You can receive paper bank statements or letting agent statements
  • But you must also create digital records of the income and expenses in your MTD software

You can't rely on paper records alone for MTD compliance. The digital records in your software are what HMRC checks when you submit quarterly updates and your final declaration.

Most landlords keep a hybrid approach: digital records in Provestor (required for MTD), with paper or scanned receipts stored as backup (required for compliance checks).

Exemptions from digital record-keeping

Some taxpayers can apply for an exemption from digital record-keeping requirements if it's not reasonably practicable for them to use MTD software.

Exemptions are available for reasons including:

  • Age (if you're over a certain age and unable to use digital tools)
  • Disability or health conditions that prevent digital record-keeping
  • Religious beliefs that prohibit use of computers
  • Remote location without internet access

If you're granted an exemption, you can continue using paper records and traditional Self Assessment instead of Making Tax Digital.

See HMRC's guidance on exemptions from Making Tax Digital for eligibility criteria and how to apply.

How Provestor meets HMRC's requirements

Provestor is MTD-compatible software that creates and stores digital records in the format HMRC requires.

When you use Provestor:

  • Every transaction you enter or import becomes a digital record — income, expenses, and finance costs are stored in MTD-compliant format
  • Records are categorised correctly — Provestor's expense categories align with HMRC's requirements, and AI auto-categorisation reduces manual work
  • Quarterly updates are generated from your digital records — Provestor pulls year-to-date totals directly from your records, ensuring consistency
  • Records are stored securely — Your digital records remain accessible for the required 5-year retention period

You don't need to think about MTD compliance separately from your normal record keeping — Provestor handles the technical requirements automatically as you record your property income and expenses.

What happens if your records are wrong

HMRC expects your digital records to be accurate and complete. If you make an error:

  • During the tax year — Correct the digital record in your software. Because quarterly updates are cumulative (always starting from 6 April), the correction will flow through in your next quarterly update automatically. See Amending quarterly updates for details.

  • After the final declaration — You'll need to submit an amended return. See Amending your final declaration for how this works.

HMRC may apply penalties if your records are deliberately incorrect or if you fail to take reasonable care. See Penalties explained for details on HMRC's penalty system.

Next steps

PreviousCash Basis Accounting
NextJointly Owned Properties

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