Why Backup Records Matter for Your MTD Quarterly Update

Filing your MTD quarterly update is one thing. Being able to back up every figure in it is another. HMRC does not ask to see your supporting documents when you submit - but that does not mean they never will. If you are selected for a compliance check, or if a figure looks unusual, you will need to show exactly where your numbers came from. This guide maps the specific documents you should keep to each section of your quarterly update, category by category, so you are never caught without evidence.

This is not about how long to keep records (covered separately in our guide on HMRC retention rules after filing), or which expenses are allowable in the first place (see MTD allowable expenses explained). This is purely about matching the right documents to the right boxes.

The Two Main Sections of a Quarterly Update

Every MTD quarterly update contains two broad areas, depending on your income type:

If you have both, you report both. Each section has its own income fields and its own expense categories. The documents you need to keep are different for each one - and within each, they vary by category. The sections below go through each in turn.

Backup Records for Self-Employment Income

Gross Income from Your Business

This is the total money received from your self-employment during the quarter - before any expenses are deducted. The documents that support this figure are:

The key point is that your income figure should match what actually came in. Your bank statement is your most reliable cross-reference. If you received £4,800 in the quarter, you should be able to show invoices or payment records totalling £4,800, and bank entries to match. For more on avoiding income errors, see our post on common sole trader income mistakes in Q1.

Note: If you are using the trading allowance instead of claiming actual expenses, you still need to keep records of your gross income. The allowance replaces your expense records, not your income records. See our guide on the trading allowance for sole traders in MTD for how this works.

Backup Records for Self-Employment Expenses, by Category

HMRC expects you to report expenses under specific categories. The documents you keep should map directly to whichever category you are claiming under. Here is what to keep for each one.

Cost of Goods Sold / Cost of Sales

If you buy stock, materials, or goods to resell, these go here. Keep:

Staff and Subcontractor Costs

If you pay employees or subcontractors, keep:

Office, Admin, and Business Premises Costs

This covers rent for a dedicated workspace, stationery, postage, and similar. Keep:

If you work from home and claim a proportion of household costs, keep a record of how you calculated the business percentage. This might be a simple note showing the number of rooms used for work and the number of hours worked. See our post on mixed-use expenses and claiming the business percentage for how to work this out.

Travel and Vehicle Costs

If you use a vehicle for business, you will either claim actual costs or the simplified mileage rate. Keep different records depending on which method you use:

For other travel - trains, taxis, flights for business trips - keep the tickets or booking confirmations and a note of the business purpose.

Advertising and Marketing

This includes website costs, social media advertising, printed flyers, and similar. Keep:

Professional and Financial Costs

Accountancy fees, legal costs directly related to your business, and bank charges go here. Keep:

Phone, Internet, and IT Costs

If your phone or broadband is partly for business, you can only claim the business proportion. Keep:

Clothing and Protective Equipment

Only specialist or protective clothing worn for work is allowable - not ordinary clothes you could wear outside work. Keep:

Training and Professional Development

Only training directly relevant to your existing work can be claimed. Keep:

Warning: Training costs for a new trade or career are not allowable - only training that improves skills in your current business. If HMRC questions a training claim, you need to show the connection clearly. Keep a brief written note of why the training was relevant to your existing work.

Backup Records for Property (Rental) Income

Gross Rental Income

This is all rent received during the quarter, including any advance rent. The documents that support this are:

The tenancy agreement is your foundation document. Without it, you have no formal record of what rent was agreed. If your tenancy has changed or been renewed, keep the updated version. For more on landlord reporting in MTD, see our guide for landlords filing their first Q1 MTD update.

Deposits

Deposits are not income and should not appear in your quarterly update income figure. But keep records of them separately - tenancy deposit scheme certificates, deposit amounts, and any correspondence about returns or deductions. If a dispute arises and you retain part of a deposit as compensation, that retained amount may become income. Good records prevent confusion later.

Backup Records for Rental Expenses, by Category

Repairs and Maintenance

This is one of the most common landlord expense categories - and one of the most scrutinised. Repair costs (fixing what is broken) are allowable. Improvement costs (adding value or upgrading beyond the original standard) are not. Keep:

Letting Agent and Management Fees

If you use an agent to find tenants or manage the property, keep:

Insurance

Buildings insurance, landlord insurance, and contents insurance for furnished properties are all allowable. Keep:

Mortgage Interest (Finance Costs)

Since the removal of full mortgage interest relief, individual landlords can claim a 20% tax credit on finance costs rather than deducting the full interest as an expense. You do not report this in your quarterly expense categories - it appears at the final declaration stage. However, you still need to keep evidence: your annual mortgage statement showing total interest paid in the tax year, and a record of which proportion relates to each property if you have more than one mortgage.

Utilities and Council Tax (Where You Pay)

If you are responsible for utilities or council tax rather than the tenant, keep:

Service Charges and Ground Rent

For leasehold properties, service charges and ground rent are generally allowable expenses. Keep:

For more detail on what is and is not allowable here, see our guide on service charges and ground rent in MTD.

Advertising for Tenants

The cost of listing a property to find tenants is allowable. Keep:

Professional Fees

Legal and professional fees related to the letting (not the purchase) are allowable. Keep:

Documents That Support Multiple Categories

Your bank statements do more work than any other single document. They are the thread that connects your declared figures to real money moving in and out. Keep statements for every account that receives business or rental income, or from which business or property expenses are paid - including personal accounts if you mix business and personal payments.

If you import bank transactions into your MTD software, keep a copy of those transaction records as exported or downloaded. A CSV file or PDF export works. This matters because if HMRC checks your figures years later, you may not still have access to the same software interface. See our guide on importing expenses by CSV for how this works in practice.

How to Organise Your Records Alongside Your Update

The most practical approach is to organise documents by quarter and by category at the time you file, not months later when memory fades. A simple folder structure - physical or digital - works well:

  1. Create a folder for each quarter (Q1, Q2, Q3, Q4)
  2. Within each quarter, create subfolders for income and each expense category you claim
  3. Drop receipts, invoices, and statements into the relevant folder as they arrive
  4. When you file your quarterly update, confirm the figures match what is in the folders

This means that if HMRC ever asks a question, you are not reconstructing records from scratch - you are simply opening a folder. For more on staying organised between filings, see our post on organising your records after Q1 for Q2.

For a broader look at what HMRC expects you to hold, see our post on HMRC record-keeping standards for MTD.

Note: If you are ever subject to an HMRC compliance check, having neatly organised records by category is the fastest way to resolve it. Our post on what records to keep after an MTD compliance check explains what that process typically looks like.

A Quick Reference: Category to Document

Summary

Good backup records for your MTD quarterly update are not complicated, but they do need to be deliberate. Every figure you file should have a corresponding document - whether that is an invoice, a bank statement, a tenancy agreement, or a mileage log. Organise by quarter and by category as you go. That way, the filing itself is straightforward, and any future question from HMRC is easy to answer. The goal is not to keep paperwork for its own sake - it is to make sure that every number you submit is one you can stand behind.

Keep Your Records Organised Alongside Your MTD Filing

AffordableMTD lets you import your income and expense figures, categorise them correctly, and submit your quarterly update directly to HMRC - all in one place. No accounting knowledge needed.

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