What are the upcoming changes to MTD?

Making Tax Digital (MTD) will soon be the only way for VAT-registered businesses to keep up with their annual returns.

Not only that, but there are several other changes you need to be aware of, which are only around the corner.

Here’s what you need to know about the upcoming changes to MTD.


Although it feels like it’s been a long time coming, MTD for VAT has officially launched. As of 1 November, anyone who doesn’t complete their VAT return via MTD-compatible software will be liable to penalties from HMRC.

You will no longer be able to use your existing VAT online account to send quarterly or monthly VAT returns. And anyone who files a VAT return through non-electric submission will face penalties of up to £400.

Businesses will be fined based on their turnover, with a penalty applied each time a return is filed incorrectly.

The penalties are:

  • £100 if turnover is below £100,000
  • £200 if turnover is between £100,000 and £5,600,000 inclusive
  • £300 if turnover is between £5,600,001 and £22,800,000 inclusive
  • £400 if turnover is £22,800,001 or above.

So, any VAT-registered business with a turnover of £85,000 a year will have no other choice but to submit their returns through MTD-compatible software.

Failure to keep VAT records will also incur fines from HMRC, resulting in £5-£15 per day penalties for non-compliance.

There will also be an introduction of a points-based system as of 1 January 2023. For every late submission, a taxpayer will accrue one point. Once they’ve reached the threshold, these points will translate into fines.

MTD penalty points will expire after two years, counting from the month you receive your first point.


The pilot scheme for MTD for ITSA is now open, with the official launch set for April 2024.

You’ll be eligible to sign up for the pilot if you’re registered for self-assessment tax returns, get income from self-employment or property and have a total qualifying income of more than £10,000.

If your qualifying income is £10,000 or less, you don’t need to sign up but can still voluntarily choose to.

You cannot sign up for the pilot if you are:

  • a trustee, charitable or otherwise
  • a personal representative of someone who has died
  • non-resident company
  • a Lloyd’s member, in relation to an underwriting business.

If you believe you cannot reasonably complete a self-assessment online, you can apply for exemption on the Government website.

MTD for corporation tax

Although it’s still a few years off, MTD for corporation tax (MTD for CT) will be expected to launch after 2026.

A Government consultation suggests that a pilot scheme will be launched in 2024, once both MTD for VAT and MTD for ITSA have been officially rolled out.

Similar to that of MTD for ITSA, MTD for CT will require companies to keep digital records of all their tax dealings throughout their accounting period. Once the year’s end comes around, companies will have to file their returns and pay any due tax via MTD-compatible software.

Don’t get left behind

At P B Syddall & Co, we believe in getting ahead of the curve while you can. That’s why we’re helping our clients prepare for the changes MTD will bring.

If you need any advice on the latest MTD-compatible software, or require support with your digital VAT returns, our team is happy to help.

Call us on 01204 380038 to find out more.