What to record for cash income
A digital record is a record of income or an expense created and stored in compatible software. For cash income, you need to capture the transaction details at the point of receipt.
While the fact sheet does not list specific fields like 'payer' or 'purpose' as mandatory legal requirements for the record itself, it confirms that business records for income must be kept for Self Assessment. The software must create and store these digital records. You must ensure the record allows you to identify the income source and amount for your tax return.
- The date the cash was received
- The amount received
- The category of income (aligned to Self Assessment categories)
- Any reference or note to identify the job or client
How cash fits into quarterly updates
Quarterly updates are summaries of your income and expenses by category. They are cumulative from 6 April. HMRC receives the category totals, not the individual transactions.
You must send an update for every period, even if there was no income and no expenses. Cash income received during the period is included in the totals for that category.
The deadlines for sending these updates are fixed. You can send an update from the end of the period up to the deadline, or up to 10 days before the period ends if you expect no further transactions.
| Period ends | Update deadline |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
Handling cash that never reaches a bank account
If you receive cash and do not deposit it into a business bank account, you still have a digital record requirement. The money is income when received.
You must enter this cash receipt into your compatible software manually. This creates the digital record required for MTD.
Once a record has been sent to HMRC in a quarterly update, it must not be moved by hand. You cannot write it out in another cell or another product, and you cannot cut and paste or copy and paste the record. The record must remain in the software where it was created.
Digital links and record keeping
If you use more than one product, the records must be digitally linked between them. HMRC examples of digital links include linked cells in spreadsheets, emailing a spreadsheet for import, transferring records on a portable device, or using XML and CSV import and export.
You must keep digital records for at least 5 years after the 31 January submission deadline for the tax year. This is the same period as for Self Assessment.
Cash basis is the default method of accounting from 2024-25. You only opt out if you choose to use traditional accounting.