Making Tax Digital Rules and Requirements: HMRC Compliance Guide

1. Digital record-keeping — affected transactions must be stored in HMRC-recognised software.
2. Digital links — data must flow between systems digitally, not by retyping.
3. Digital submission — returns and updates go to HMRC through software via the MTD API.

MTD for VAT: in force since April 2022 for all VAT-registered businesses. Digital VAT records, digital links, VAT return filed through software.

MTD for Income Tax (ITSA): phased mandation from April 2026 (over £50,000), April 2027 (£30,000–£50,000), and April 2028 (£20,000–£30,000). Quarterly updates plus a final declaration.

MTD for Corporation Tax: on HMRC's roadmap but not yet mandated.

• Sales invoices and receipts (date, amount, VAT where applicable).
• Purchase invoices and allowable expenses.
• For landlords: rental income and property expenses.
• For VAT: VAT scheme details and the nine VAT return boxes.

“Digital links” is the requirement that catches people out, so it is worth being concrete. A digital link is an electronic transfer of data between programs — a spreadsheet formula, a cell reference, an imported or exported file, or an API call. What is not allowed is manually retyping figures from one place to another, or copying and pasting values between spreadsheets. The chain must be unbroken from your source records all the way to the figures submitted to HMRC.

In practice this is simplest if you use one accounting package end to end. If you prefer spreadsheets, bridging software provides the compliant digital link to HMRC — but every step before the bridge must also be linked, not hand-keyed.

• Are your records kept in HMRC-recognised software (or a spreadsheet plus bridging software)?
• Is every figure digitally linked through to what you submit — no retyping?
• Are you submitting through the software, not the old online portal?
• Are you meeting every deadline — quarterly updates and the final declaration or VAT return?

Four yeses and you are compliant. Any no is worth fixing before a deadline — and it is exactly what we set up for clients.

HMRC's points-based late submission penalty system applies to VAT and to MTD for Income Tax. Reaching the points threshold triggers a £200 penalty per further late submission. Late payment attracts separate percentage penalties and interest.

Full MTD penalties guide →

If you are not sure whether your records and software meet the digital links rule, an MTD compliance review is the fastest way to close gaps before mandation hits. Our consultants can audit your workflow and recommend fixes.

Book an MTD compliance review →