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MTD Digital Links: What HMRC Requires and How to Meet It

MTD Digital Links: What HMRC Requires and How to Meet It ! Geometric platforms linked by a continuous path A digital link under Making Tax Digital (MTD) is an electronic transfer of data from one piece of software to another, with no manual step in between.

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MTD Digital Links: What HMRC Requires and How to Meet It

Geometric platforms linked by a continuous path

A digital link under Making Tax Digital (MTD) is an electronic transfer of data from one piece of software to another, with no manual step in between. HMRC defines a digital link as an electronic or digital transfer, or an exchange of data, between software programs, products or applications. Copying and pasting does not count. The rule applies to MTD for VAT and to MTD for Income Tax, which began on 1 April 2026 for the first group of sole traders and landlords. This article explains what counts, what does not, who is affected and how to keep the chain of records intact.

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TL;DR

  • A digital link is an automated or file-based transfer of data between software products. Rekeying figures, or copying and pasting them, breaks the link.
  • Accepted methods include linked spreadsheet cells, CSV or XML import and export, file download and upload, automated transfer and API transfer.
  • MTD for Income Tax applies to qualifying income over £50,000 from April 2026, over £30,000 from April 2027 and over £20,000 from April 2028.
  • Digital links are needed from the point where digital records are first created. Original receipts and invoices must still be kept.
  • A single product that creates the records and sends the quarterly update removes most of the linking work.

Table of Contents

MTD requires three things: digital records, quarterly updates and a year-end declaration. The Association of Taxation Technicians (ATT) explains that all transfers of data used to meet these requirements have to be made using digital links.

The idea is simple. Once a figure is recorded digitally, it should travel to HMRC without anyone retyping it. A person who types a number into a second program introduces a chance of error, and the digital link rule exists to remove that step.

HMRC’s research into the VAT rules found that businesses understood the point. In the 2021 HMRC research report, bridging software users understood digital links as the mechanism that removes the need to move data by hand, such as through copy and paste.

An earlier HMRC survey of VAT businesses found that 68% correctly identified the need for digital links from April 2021. That was lower than the share who identified the need to keep digital records (87%) or to use compatible software (82%). Digital links are the part of MTD that is most often missed.

Survey results for three MTD requirements

Yes, to both. The requirement began with MTD for VAT. HMRC’s research report records that VAT-registered businesses above the £85,000 threshold have used compatible software since April 2019, and that from 1 April 2021 digital links had to be in place between all parts of a business’s functional compatible software.

MTD for Income Tax uses the same principle. HMRC’s guidance on creating digital records for Income Tax tells taxpayers to link record-keeping and submission software digitally if more than one product is used.

Ledgery supports sole trader and property income. It does not handle limited companies or VAT, so the VAT rules are covered here only as background.

Who must comply, and from when

The Income Tax (Digital Obligations) Regulations 2026 bring MTD for Income Tax into effect from 1 April 2026. Affected sole traders and landlords must keep records digitally, use MTD-compatible software to send quarterly updates of income and expenses, and file the annual Self Assessment return. The rollout is phased by qualifying income:

Qualifying income Start date
Over £50,000 April 2026
Over £30,000 April 2027
Over £20,000 April 2028

The ATT sets out the same thresholds and dates. Qualifying income is the combined gross income from self-employment and property, not profit. Anyone near a threshold should check the figure on HMRC’s own pages.

The obligation does not start at the quarterly update. The ATT Technical FAQ states that digital links must be maintained from the point at which digital records are first created. For people who use an agent, the working arrangement between client and agent affects when digital links are first needed.

HMRC’s guidance lists the acceptable methods:

  • linked cells in spreadsheets
  • emailing a spreadsheet that holds digital records so it can be imported into another software product
  • moving digital records onto a portable device such as a memory stick or flash drive
  • XML or CSV importing and exporting
  • downloading and uploading files
  • automated data transfer
  • API transfer

The ATT Technical FAQ gives a worked example. A client collects individual invoices in a spreadsheet. That spreadsheet is the start of the digital records, so digital links apply from then on. If the client sends it to an agent to file the quarterly updates, it must be imported into the agent’s software through a digital link, for example as a CSV file. Retyping the totals into the agent’s system would not meet the rule.

An API transfer is the most direct route. One program sends data to another through a defined connection, with no file handled in between. Bank feeds and the submission of quarterly updates to HMRC both work this way.

Transfers that do not count

The ICAEW’s MTDtalk from March 2026 lists the unacceptable forms of data transfer: manually transferring data within or between programs, which means rekeying, and using cut and paste or copy and paste to move records.

HMRC adds a rule about timing. Once a digital record has been created and sent to HMRC in a quarterly update, it must not be moved by hand within the record-keeping software or to other software. That includes writing the information out in another cell as well as copy and paste.

Typical places where a link breaks:

  1. A bank statement is read off the screen and typed into a spreadsheet.
  2. Monthly totals are copied from one spreadsheet tab into a separate workbook.
  3. Totals from a records spreadsheet are pasted into the submission software.
  4. An invoice amount is retyped from a PDF into the accounting tool.

The first and fourth cases are about creating a record. How a record is first created is a separate matter from how it is moved, and receipts are a common starting point. Scanning a receipt with optical character recognition produces the digital record directly. Ledgery’s article on OCR for receipts under MTD covers this step.

The rule has limits. The ICAEW states that digital links are not needed for records of other income sources such as employment income, dividends and interest. They are also not needed for booking systems, till systems, software used only to submit the year-end return (it receives data from HMRC by API), or records shared with other landlords when property is held jointly.

This narrows the task. Only the records that make up business income and expenses for the quarterly updates need a continuous digital chain.

Original documents still matter. The ATT states that digital records alone are not enough. Taxpayers must also hold the original invoices, bank statements and similar documents from which the digital records were made, and keep them for the appropriate period. A photographed receipt and its stored image can support this, but the question of which form of evidence HMRC accepts should be checked against HMRC’s record-keeping guidance.

Exemptions

Some people do not have to use MTD. The 2026 Regulations set out several exemptions, including for the digitally excluded and for specified groups such as ministers of religion, Lloyd’s underwriters and individuals with a power of attorney.

The GOV.UK MTD for Income Tax FAQ, published 14 May 2026, explains that exemptions can be automatic or by application, and either permanent unless circumstances change or temporary, lasting until April 2027 at the earliest. Digital exclusion is a main reason to apply. The ATT notes that an application can be made by the taxpayer or by an authorised third party. Anyone who thinks they qualify should apply through HMRC before relying on an exemption.

For VAT, HMRC’s compliance factsheet CC/FS69 states that a business which does not use digital links between the parts of its functional compatible software may be charged £5 to £15 for every day that the requirement is not met. The same factsheet describes a penalty of up to £400 for each VAT return filed without functional compatible software.

For record-keeping more generally, the ATT states that a penalty of up to £3,000 may be charged for each failure to keep adequate records, including breaks in digital links. The ATT Technical FAQ adds that no new compliance powers were created for MTD. Compliance checks into MTD returns are made under existing legislation.

The same pattern appears in other trades that are moving paperwork online. A garage that keeps estimates, invoices and accounting in separate tools faces the same risk of retyping, which is one of the benefits of digitising estimates in a single system.

The ATT also describes the late payment penalty regime. No penalty applies for 15 days or less. After that the charges are based on the number of days overdue, and the percentages rise from April 2027. This is separate from the digital record rules, but it applies to the same taxpayers.

Penalties for broken links

How to check a record-keeping process

HMRC’s guidance supports a short checklist:

  1. Software is used to create the digital records.
  2. If more than one product is used, the products are linked digitally.
  3. Data moves by one of the accepted methods: linked cells, email and import, portable device, XML or CSV, file transfer, automated transfer or API.
  4. Original records or supporting documents are kept.

The HMRC guidance lists these same checks. A practical test is to trace one figure, such as a single expense, from the receipt to the quarterly update. If the path contains a step where someone types or pastes it, the chain is broken at that step.

The basis on which income and expenses are recorded also affects how the records are set up. Ledgery’s guide on cash basis and accruals for sole traders explains the two methods. Keeping business and private spending apart also makes the records easier to link; the article on personal and business expenses sets out what sole traders can claim.

Our perspective

Most digital link problems come from having several tools. A spreadsheet holds the income, a banking app holds the expenses, and a separate product submits the update. Each hand-off is a place where a figure can be retyped.

We built Ledgery to reduce those hand-offs. Receipts are scanned and stored as digital records. Income and expense records, invoices, Open Banking feeds and the quarterly HMRC update sit in one platform for both self-employment and property income. Our design aims to keep the chain from receipt to submission inside one product, and filing to HMRC stays under the user’s control.

Where an accountant is involved, accountant access means they can work in the same records. Records can also be exported when a file is needed. Deadline alerts remind users when an update is due.

The Ledgery Team

Ledgery for quarterly updates

Ledgery is income tax software for UK sole traders and landlords. It scans receipts, keeps income and expense records, creates invoices, prepares quarterly updates for HMRC and sends deadline reminders. The first quarter is free, after which a monthly or annual subscription applies under the Simple, Grow or Pro plan. It does not cover limited companies or VAT. Details are on the Ledgery plans page.

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The platform is designed for people earning over £50,000, the group that must comply from April 2026, and for those who will follow in 2027 and 2028.

FAQ

Is copying and pasting figures into HMRC software allowed?

No. HMRC states that copy and paste does not count as a digital link. Once a record has been sent in a quarterly update, it must not be moved by hand, including by writing it out in another cell.

Can a spreadsheet still be used?

Yes. HMRC lists linked spreadsheet cells and CSV import and export among the accepted methods. The spreadsheet must be connected to the submission software through one of those methods, not retyped.

No. The ICAEW states that records of other income sources such as employment income, dividends and interest do not need to be digitally linked. Only the business income and expense records for the quarterly updates are covered.

Digital links are needed from the point where the digital records are first created. The ATT notes that the working arrangement with the agent affects when this happens. If a client’s spreadsheet goes to the agent, it must be imported through a digital link such as a CSV file.

Sources

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This article is general information about Making Tax Digital, not tax advice for your situation. Rules and dates come from HMRC guidance current at the date of publication — check the latest position before acting, or speak to an accountant.