How to Build a Digital Recordkeeping Stack
Practical advice on choosing and combining software to manage your MTD records digitally
With the April 2026 MTD deadline fast approaching, building the right digital recordkeeping stack is essential [1]. But you don’t have to use just one piece of software – HMRC allows you to combine multiple tools, as long as they’re digitally linked [6]. This guide will help you understand your options and build a stack that works for your specific needs.
What is a Digital Recordkeeping Stack?
A digital recordkeeping stack is simply the combination of software tools you use to:
- Capture and store your income and expense records digitally [6]
- Prepare and submit quarterly updates to HMRC [6]
- File your end-of-year tax declaration [6]
You can choose either a single software product that does everything, or multiple products that work together [6]. If you use multiple products, they must be digitally linked – meaning data flows automatically between them without manual copying or pasting [6].
HMRC explicitly states you must not: copy information by writing it out in another cell or in other software, or use ‘cut and paste’ or ‘copy and paste’ to move records [6]. All transfers must use digital links.
Step 1: Understand What You Need to Record Digitally
Mandatory Digital Records
For each self-employment or property income source, you must create digital records of [6]:
| Income Records | Expense Records |
|---|---|
For each record, you need to capture the amount, date, and category [6].
What You DON’T Need to Record Digitally
Some income sources are excluded from MTD requirements, including [6]:
- Employment income (PAYE)
- Partnership income (as an individual partner)
- Dividends (including from your own company)
- State Pension and private pensions
- Savings and investment income
Step 2: Choose Your Software Architecture
Option A
Single Product
One software does everything: record keeping + submissions [6]
Option B
Multiple Products
Separate tools for records and submissions, digitally linked [6]
Option A: The All-in-One Stack
This is the simplest approach – one piece of MTD-compatible software handles everything from bank feeds to final submissions [4]. Popular all-in-one options include:
| Software | Best For | Price (from) | Key Features |
|---|---|---|---|
| Zoho Books | Overall best for simplicity [1] | Free / £12/month [1] | Easy-to-use interface, Zoho Academy learning resources, mobile app [1] |
| Xero Simple | Scalable for growing businesses [2] | £7/month [5] | Hubdoc receipt capture, cash coding, multi-business support [2] |
| QuickBooks Sole Trader | Mobile-first experience [2] | £10/month [5] | GPS mileage tracking, AI-powered categorisation, receipt capture [2] |
| Sage Accounting Individual | Low-cost, mobile-friendly [2] | Free / £7/month [2] | Swipe to categorise, receipt capture with AI learning [2] |
| FreeAgent | Freelancers, often free via banks [1] | £10-£19/month [5] | Radar tax timeline, multi-currency, strong mobile app [2] |
Option B: The Multi-Tool Stack
If you prefer to keep using spreadsheets or have specialised needs, you can build a stack with multiple tools [6]. Common combinations include:
| Stack Component | Purpose | Example Tools |
|---|---|---|
| Record Keeping | Capture income and expenses | Spreadsheets, Dext (receipt capture), dedicated bookkeeping tools [5] |
| Bridging Software | Connects records to HMRC for submission [6] | MyTaxDigital, QuickFile bridging, Excel import templates [4][8] |
A landlord keeps their income and expense records in Excel. At the end of each quarter, they use MyTaxDigital (free bridging software) to upload their CSV file and submit the quarterly update directly to HMRC [4]. This stack works as long as the data transfer is digital (no manual rekeying).
Step 3: Understand Digital Linking Requirements
If you use multiple products, you need to establish digital links between them. HMRC accepts several methods of digital linking [6]:
| ✅ Allowed | ❌ Not Allowed |
|---|---|
Step 4: Consider Multiple Income Sources
Sole Traders with Multiple Businesses
If you have more than one sole trader business (e.g., electrician and driving instructor), you must [6]:
- Create separate digital records for each business
- Send separate quarterly updates for each
Some software handles this better than others. Xero Simple offers a purpose-built multi-business setup within a single sole trader plan [2].
Landlords with Multiple Properties
You should create separate digital records for your [6]:
- UK property business (all UK properties treated as one business)
- Foreign property business (all non-UK properties treated as one business)
Your share of jointly let properties forms part of your UK or foreign property business [6].
Step 5: Compare Key Features
Invoice Limits – A Critical Consideration
Some entry-level plans have strict invoice caps that could catch you out [5]:
| Software | Plan | Invoice Limit |
|---|---|---|
| Xero Simple | Simple tier | 10 invoices per month [2][5] |
| Xero Simple | Ignite tier | 20 invoices per month [5] |
| Sage Individual | Free | Basic functionality [2] |
Mobile App Availability
If you’re often on the move, mobile functionality matters [5]:
- FreeAgent: Full mobile access to raise/send invoices, track expenses [5]
- QuickBooks: Strong mobile-first design with GPS mileage [2]
- Sage Individual: Purpose-built mobile with swipe to categorise [2]
- Dext: Excellent mobile receipt capture [5]
Receipt Capture Options
Step 6: Set Up Your Stack
Authorise Your Software with HMRC
Before submitting any returns, you must authorise each software product with HMRC [4]. The process is similar across all software:
1. Register for MTD
Complete HMRC signup via GOV.UK [4]
2. Connect Software
In your software, select “Connect to HMRC” [4]
3. Authorise Access
Log into Government Gateway, grant permission [4]
4. Confirm Connection
Software confirms it’s ready to submit [4]
HMRC requires you to update your MTD connection every 18 months. Your software should warn you when it’s expiring [3].
Connect Bank Feeds
Most cloud accounting software offers Open Banking connections for automatic transaction import [5]:
- Xero/QuickBooks/FreeAgent: Daily automatic imports [5]
- Sage: Real-time imports [5]
- Dext: Real-time bank feeds [5]
Some software may have limitations on historical data – check before committing [5].
Step 7: Test Your Stack Before Go-Live
- ☐ Run through a test quarter with dummy data [7]
- ☐ Verify digital links work between any multiple products [6]
- ☐ Check invoice limits align with your actual volumes [5]
- ☐ Confirm bank feeds are pulling transactions correctly [5]
- ☐ Test receipt capture on your mobile device [2]
- ☐ If using bridging software, test CSV import and submission [4]
Quick Reference: Choose Your Stack
| Your Profile | Recommended Stack | Why |
|---|---|---|
| Simple sole trader, spreadsheet user | Spreadsheet + MyTaxDigital (free) [4] | Keep existing workflow, add bridging for compliance |
| Tech-savvy, wants simplicity | Zoho Books [1] | Easiest to learn, good free resources |
| NatWest/RBS customer | FreeAgent (free via bank) [1] | Full-featured, completely free |
| Landlord with multiple properties | Hammock or FreeAgent [5] | Property-specific features, rent tracking |
| Multiple businesses (electrician + landlord) | Xero Simple [2] | Multi-business support in one licence |
| Budget-conscious, basic needs | Sage Individual Free [2] | Free, MTD-compliant, mobile app |
Need Help Building Your Digital Stack?
With dozens of MTD-compatible software options available [5], choosing the right combination can be overwhelming. Our team can assess your specific needs and help you build a digital recordkeeping stack that works for your business – whether that’s a simple all-in-one solution or a more complex multi-tool setup.
Book Your Digital Stack ConsultationReferences
1. Startups.co.uk. (2026). How To Choose the Right Making Tax Digital Software. Available at: https://startups.co.uk/accounting/making-tax-digital-approved-software/ []
2. IFA. (2026). MTD for ITSA software: the big four compared. Available at: https://financialaccountant.co.uk/features/mtd-sole-trader-software-comparison/ []
3. SAP. (2026). Making Tax Digital Setup. Available at: https://help.sap.com/doc/bf2b8e2b3984475fb1c51e53310c32b0/10.0/en-US/269741ef7a3f47ce8fcb3277d52ea8c5.html []
4. WallsMan Creative. (2026). Top 5 MTD Software to Handle Making Tax Digital in the UK. Available at: https://creative.accountants/technology-software/best-mtd-software/ []
5. Wellers Accountants. (2026). What is the best Making Tax Digital software for Income Tax Self Assessment? Available at: https://www.wellersaccountants.co.uk/blog/what-is-the-best-making-tax-digital-software-for-income-tax-self-assessment []
6. GOV.UK. (2026). Use Making Tax Digital for Income Tax – Create digital records. Available at: https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records []
7. startupdeals.co.uk. (2026). Best Accounting Software for Making Tax Digital – 2026 UK Guide. Available at: https://startupdeals.co.uk/best-accounting-software-for-making-tax-digital []
8. Bright Software Group. (2025). Recap: 5 Bright Launches That Stood Out. Available at: https://brightsg.com/en-ie/blog/recap-5-bright-launches-that-stood-out/ []
