Making Tax Digital: What It Means for Your Mileage Records

From today, 6 April 2026, Making Tax Digital for Income Tax (MTD ITSA) is mandatory for self-employed individuals and landlords earning over £50,000. If that's you, HMRC now requires you to keep digital records and submit quarterly updates through compatible software.

Most of the conversation around MTD focuses on accounting software like FreeAgent, Xero, and QuickBooks. But there's a part that gets overlooked: where do your mileage figures actually come from?

What MTD means in practice

Under MTD, you need to:

• Keep digital records of your income and expenses (not paper, not spreadsheets emailed to your accountant once a year)
• Submit quarterly updates to HMRC through compatible software
• File a final end-of-period statement instead of the traditional Self Assessment return

For mileage, this means your records need to be digital, contemporaneous (recorded at the time of the journey, not estimated months later), and detailed enough to withstand an HMRC enquiry.

What "MTD-compatible software" actually means

HMRC maintains an official list of MTD-compatible software. To qualify, software must be able to connect directly to HMRC's systems via their API to submit your quarterly updates and end-of-period statement digitally. That's the core requirement.

What doesn't count: a PDF you email to your accountant. A screenshot of a spreadsheet. A paper ledger you type into a web form. The word "digital" in MTD doesn't just mean "on a computer". It means there's a direct digital connection from your records to HMRC's systems, with no manual re-keying in between.

Most of the big accounting packages (FreeAgent, Xero, QuickBooks, Sage) are MTD-compatible. Some free options exist too, though they tend to be more basic. If you use an accountant, check with them which software they support. Many accountants have a preferred platform and will set it up for you.

Your mileage tracker doesn't need to be MTD-compatible itself. It needs to produce records that feed into your MTD-compatible accounting software. That's a CSV export that gets imported, or a PDF report your accountant uses to enter your mileage claim. The mileage tracker is a source record; the accounting software is the submission tool.

How quarterly submissions work

Under the old system, you did everything once a year. Gather your records in January, fill in the Self Assessment form, pay the bill. MTD changes that rhythm.

Each quarter, you submit a summary of your income and expenses to HMRC through your compatible software. For the 2026/27 tax year, the quarters and deadlines are:

• Quarter 1 (6 April to 5 July): submit by 7 August 2026
• Quarter 2 (6 July to 5 October): submit by 7 November 2026
• Quarter 3 (6 October to 5 January): submit by 7 February 2027
• Quarter 4 (6 January to 5 April): submit by 7 May 2027

Each quarterly update includes your total income and categorised expenses for that period. For mileage, that means knowing your business miles for the quarter and calculating the allowance at 45p (or 25p if you've passed 10,000). You then file an end-of-period statement after the fourth quarter, which replaces the traditional Self Assessment return.

The quarterly updates aren't tax returns. HMRC isn't calculating your tax four times a year. They're progress updates: check-ins that force you to keep your records current rather than dumping everything in January.

The practical upside: if you're keeping records as you go (which you should be anyway), the quarterly submission itself takes minutes. Most compatible software pre-populates the figures from your records. You review, confirm, and submit.

What records to keep beyond mileage

Mileage is one expense. MTD covers everything. Here's what HMRC expects you to record digitally:

• Income: every invoice you issue, every payment you receive. Date, amount, who from, what for. If you receive cash payments, record those too.
• Expenses: everything you spend on the business. Materials, tools, software, phone bills, insurance, professional subscriptions, office supplies. Keep the receipt or invoice for each one.
• Invoices: both sales invoices you issue and purchase invoices you receive. These are your primary evidence if HMRC enquires.
• Bank transactions: ideally your accounting software connects to your business bank account and imports transactions automatically. If you use a personal account for business (common for sole traders), you need to identify and tag business transactions.
• Capital equipment: anything you buy for the business over £1,000 that you'll use for several years. Computers, vehicles, machinery. These have their own tax treatment (capital allowances).

The common thread: record it when it happens, not from memory later. That applies to a £3,000 invoice just as much as a 12-mile trip to a client.

What you need to evidence in a mileage claim

HMRC doesn't publish a specific template for mileage records. But under the "wholly and exclusively" test, you need to be able to prove that each journey was genuinely for business. In practice, if HMRC opens a compliance check, they'll ask for:

• Date of the journey
• Start and end location
• Purpose: why the journey was for business
• Miles driven
• Classification: business, personal, or commute

A scribbled note in a diary won't cut it under MTD. The records need to be in a digital format that can be shared with HMRC if requested.

Why spreadsheets are risky under MTD

Plenty of self-employed people track mileage in a spreadsheet. It works, technically. But under MTD, spreadsheets have problems:

• They're not contemporaneous. Most people fill them in weeks or months after the journey. HMRC knows this.
• They're easy to fabricate. HMRC gives less weight to records that could have been created after the fact.
• They don't connect to your accounting software. MTD requires a digital link between your records and your submission. Manually typing spreadsheet totals into Xero isn't a digital link.
• They lose detail. A spreadsheet that says "client visits, 120 miles" for a whole week won't hold up in a compliance check. HMRC will ask about individual journeys.

The bridging software loophole

Strictly speaking, spreadsheets aren't banned under MTD. But there's a catch. If you want to keep using a spreadsheet, you need bridging software that creates a digital link between your spreadsheet and HMRC's systems. The spreadsheet feeds data to the bridging software, which submits it to HMRC via the API. No manual re-typing allowed in that chain.

Several bridging products exist. Some are free, some charge a monthly fee. They essentially read data from specific cells in your spreadsheet and format it for HMRC's API. It's a technically valid approach, but it adds another moving part. You're maintaining a spreadsheet, keeping it in the exact format the bridging software expects, and hoping nothing breaks when Excel updates or you accidentally move a column.

For mileage specifically, bridging software doesn't solve the underlying problem. Your spreadsheet still contains data you typed in from memory. The digital link is between the spreadsheet and HMRC, not between the actual journey and the spreadsheet. HMRC can still challenge the quality of the source data in an enquiry.

A GPS-based mileage tracker that records each journey automatically, with timestamps and locations, produces exactly the kind of evidence that holds up in a compliance check, and it happens in real time, not from memory.

How automatic tracking satisfies MTD requirements

An automatic mileage tracker like KeptMiles records every journey as it happens:

• Date and time captured automatically from GPS
• Start and end locations recorded and reverse-geocoded to readable addresses
• Distance calculated from the actual route driven
• Classification: swipe to mark each journey as business, personal, or commute
• Purpose: add a note if you want ("client visit", "supplier pickup")

The records are created in the moment, stored digitally on your phone with cloud backup, and can be exported as PDF or CSV reports that feed directly into your accounting software or go straight to your accountant.

That's the kind of evidence trail that survives an HMRC enquiry.

Penalties for MTD non-compliance

HMRC has said the first year of MTD for Income Tax will have a "soft landing" period. In practice, that means they won't issue penalties for late quarterly updates in 2026/27, provided you're making a reasonable effort to comply. They want people to get used to the system without the fear of immediate fines.

But don't confuse "soft landing" with "optional". The requirement to keep digital records and use compatible software applies from day one. And the soft landing won't last. From April 2027, the full penalty regime kicks in:

• Late submission penalties work on a points system. Each late quarterly update earns a point. Once you hit the threshold (currently four points for quarterly obligations), you get a £200 penalty. Further late submissions incur £200 each until you clear your points by filing on time for a sustained period.
• Late payment penalties are separate. If you owe tax and don't pay on time, the first penalty is 2% of the tax owed at day 15, rising to 4% at day 30, plus a daily rate of 4% per annum after that.
• Interest accrues on all unpaid tax from the due date. Currently around 7.5%, though the rate changes with the Bank of England base rate.

The shift from the old system is significant. Under Self Assessment, you had one deadline per year. Miss it, and you got one penalty. Under MTD, there are four quarterly deadlines plus the final statement. That's five opportunities per year to pick up a late submission point. Rack up four points over a couple of years and the fines start.

The message from HMRC is clear: keep up with it throughout the year, or it will cost you.

The £30,000 threshold is coming next

Today's £50,000 threshold is just the start. From April 2027, MTD extends to self-employed individuals and landlords earning over £30,000. That pulls in a much larger group, including many tradespeople, delivery drivers, and freelancers who previously flew under the radar.

If you're between £30,000 and £50,000, you have exactly one year. The soft landing period that the £50,000+ group gets this year won't necessarily apply to you when your turn comes. HMRC haven't confirmed the details yet, but the safest assumption is that the penalty regime will be fully operational by then.

Starting your digital mileage records now means you'll have a full year of clean data when MTD kicks in for you. You'll also have twelve months of practice with the tools and the workflow. That's worth more than it sounds. The people who struggle with MTD won't be the ones who can't use the software. It'll be the ones who never built the habit of recording things in real time.

Below £30,000, there's no confirmed date yet. HMRC has said it intends to extend MTD further, but no legislation has been passed for the sub-£30,000 group. For now, if you earn under £30,000, MTD is not mandatory, but the record-keeping requirements under normal Self Assessment still apply, and digital records are strongly recommended regardless.

Bridging software: making spreadsheets work under MTD

If you really want to keep using a spreadsheet for your records, there's a workaround: bridging software. This is a tool that reads your spreadsheet data and submits it to HMRC digitally, creating the required "digital link" between your records and HMRC's systems.

Several MTD-compatible products offer bridging functionality, including some free options from HMRC's own compatible software list. The spreadsheet becomes your record-keeping tool, and the bridging software handles the submission. But there are conditions:

• The data must flow digitally. You can't print your spreadsheet and type the numbers into the bridging tool. It must import directly from the file (usually via CSV or Excel format). The whole point of "digital links" is no manual re-keying at any point in the chain.
• The spreadsheet must contain the required detail. A single cell saying "£4,500 mileage" isn't enough. Individual transactions, dates, and categories are expected.
• You're still responsible for accuracy. Bridging software submits whatever you give it. If your spreadsheet has errors, those errors go straight to HMRC.
• It must be a genuine digital link. Copy-pasting values between spreadsheets, or manually transferring totals, breaks the chain. HMRC's guidance on digital links is specific: data must be transferred or linked electronically.

Bridging software is a pragmatic option for people who have well-maintained spreadsheets and don't want to move to full accounting software. But for most self-employed people, the move to proper accounting software is inevitable, and it's easier to start now than to migrate mid-year.

What to do today

1. Start tracking now. The new tax year started today. Every business mile from this point forward should be recorded digitally.
2. Use a dedicated mileage tracker, not a spreadsheet. GPS-based tracking creates the contemporaneous, detailed records that hold up if HMRC asks questions.
3. Classify as you go. Don't let unclassified journeys pile up. A quick swipe after each journey takes two seconds. Doing it from memory in January takes hours and produces weaker evidence. See the guide on whether you need a mileage log.
4. Export regularly. Send your mileage reports to your accountant quarterly: it aligns with MTD's quarterly update cycle and keeps everyone in sync. The new tax year checklist covers everything else you need to sort out.

All Premium features free until 5th April 2027 (end of 26/27 tax year), no sign-up needed. Start tracking your 2026/27 mileage from day one.