Record-keeping rules: what HMRC requires per transaction

Under Making Tax Digital, your records live in software rather than a shoebox, and HMRC sets a minimum for what each transaction must show. The good news is that the rules are less scary than they sound — a consistent weekly rhythm beats a January panic every time.

What HMRC requires for each transaction

• The date — when money came in or went out.
• The amount — including any VAT, if you're registered.
• The category — one of HMRC's standard expense categories.
• Who you paid, or who paid you — the supplier or customer behind expenses.
• The evidence — a receipt, invoice or bank statement supporting the entry.
• A digital record — kept in software that can send your quarterly updates to HMRC.
• Timely updates — records kept up to date, in time for each quarterly deadline one month after the quarter ends.

What you don't need

• A paper receipt for absolutely everything — a dated note of the amount and purpose is better than nothing for tiny cash spends, though receipts should be your default.
• A separate business bank account — strongly recommended, but not a legal requirement.
• An accountant — you can do it yourself; many sole traders do.
• Paper storage — photos and PDFs of receipts count as records.
• Same-day entry — a weekly session is fine, as long as quarterly deadlines are met.

Common mistakes

The shoebox approach still catches people out. Under quarterly updates there is no year-long grace period — you need your records in shape every three months, or your updates become guesswork. Fifteen minutes a week logging transactions and photographing receipts is genuinely all it takes for most small businesses.

Cash is the other blind spot. Cash sales that go unrecorded and cash expenses paid from the pocket both leak out of your totals. Keep a simple daily note of cash in and cash out, and reconcile it to what reaches the bank.

Finally, people destroy records far too early. Self-employed records must be kept for at least five years after the 31 January submission deadline — bank statements, mileage logs, receipts and invoices all included. Check the date before you shred anything.

How to record it in your MTD tracker

Log every transaction with its date, amount, category and payee, and keep the receipt or statement behind it. The tracker mirrors HMRC's own categories, so your digital records stay tidy and your quarterly totals add themselves.