The Three Core MTD Rules
- Digital record-keeping — affected transactions must be stored in HMRC-recognised software.
- Digital links — data must flow between systems digitally, not by retyping.
- Digital submission — returns and updates go to HMRC through software via the MTD API.
Specific Requirements by Tax
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.
Records You Must Keep Digitally
- 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.
Penalties for Non-Compliance
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.
Getting Practical Help
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.