Digital Recording and Linking Rules for MTD for Income Tax

With the launch of Making Tax Digital (MTD) for Income Tax just round the corner, you might be wondering what figures need to digitally recorded and linked to remain compliant with HMRC's new system. The answer will hopefully be a pleasant surprise - with the amount of information that actually needs to be digitally recorded and linked being far less than you expected or dreaded!

What Does “Digitally Recorded" and "Digitally Linked” Mean?

In the context of Making Tax Digital, "digitally recorded" means financial figures need to be stored in accounting software or a spreadsheet, while “digitally linked” means figures submitted to HMRC must flow between your records and your MTD-compatible software without any manual re-typing or copy-and-paste. Once a transaction has been recorded digitally, every transfer of that data - from the source record through to HMRC - must remain digital. For those of you who use spreadsheets to digitally record your business sales and expenses and calculate your VAT figures, you'll already be familiar with the process of using bridging software to digitally extract those figures before submitting them to HMRC.

What Needs to Be Digitally Recorded and Linked?

You don’t need to worry about digitally recording and linking every single item normally specified for a Self Assessment, along with the additional quarterly update figures expected under MTD for Income Tax. In fact, only the quarterly update figures for each business or property income source must be digitally recorded and linked. That’s good news - especially for taxpayers who keep their Income Tax records in a spreadsheet, a notebook, or even on the back of a cigarette packet.

This clarification means that annual summaries, accounting adjustments (BSAS), and brought-forward loss amounts for each business or property income, along with personal income, tax reliefs, and deductions, do not need to be digitally recorded and linked. These can be typed or copy-and-pasted into MTD-compatible software, such as our soon to be released Easy MTD, in the same way you did for HMRC's online Self Assessment form. With Easy MTD you have the flexibility to either digitally link this information or specify it manually. However, for quarterly update figures, Easy MTD will enforce a digital link to the spreadsheet (or text or CSV file) where the figures reside so MTD for Income Tax rules are adhered to.

What Figures Do Quarterly Updates Contain?

The figures that must be digitally recorded and linked for quarterly updates differ for self-employment, UK property, or foreign property income sources:

If the turnover for a self-employment or property income is below £90K, only a single consolidated expense figure needs to be submitted alongside the income figures. This means what you record digitally is minimal and getting your quarterly updates submitted is super fast and super easy.

How Do I Digitally Link?

Firstly, if you're not using accounting software, you'll need to digitally record your self-employment, UK property and/or foreign property income and expenses in a spreadsheet then use bridging software like Easy MTD to submit to HMRC. Due for release in 2026, Easy MTD will allow you to comply with MTD for Income Tax and MTD for VAT. It provides the functionality to digitally link necessary figures (quarterly updates for Income Tax, and the 9 VAT figures for VAT), and manually specify or copy-and-paste all other Income Tax figures - although digitally linking them is possible too.

If you would like to find out more about Easy MTD, please use the contact form.