What Are the Rules for MTD in 2023?

It’s been almost a year since Making Tax Digital (MTD) for VAT was officially rolled out for all VAT-registered businesses.

The Government announced in 2019 its plan to begin a phased introduction of MTD to cover all areas of business tax. Since then, there have been changes to the schedule, which may leave you wondering what exactly is going on.

Here’s everything you need to know about the current MTD rules for 2023.


As mentioned above, MTD for VAT has been in full effect since April 2022. After being gradually rolled out, the scheme now requires all VAT-registered businesses to organise and file their essential documents on MTD-compatible software, such as Xero or QuickBooks.

The aim of transitioning to a digital way of working is to streamline the tax process for businesses, making it easier and more accurate to submit tax returns to HMRC.

The next step of the MTD rollout looks to modernise income tax self-assessments (MTD for ITSA).


MTD for ITSA will involve sole traders, and others who submit annual self-assessment tax returns, to do so through MTD-compatible software.

And much like MTD for VAT, MTD for ITSA will remove the regular self-assessment reporting schedule in favour of quarterly submissions. Not only that, but self-assessment taxpayers will need to produce an end-of-period statement and a final declaration.

Initially set to launch in April 2024, MTD for ITSA will now come into effect in April 2026 for businesses, self-employed workers, and landlords with an income of £50,000 and over and in April 2027 for anyone earning £30,000 a year.

Due to the new phased approach taken by the Government, MTD for ITSA will not extend to general partnerships as anticipated in 2025. As of now, HMRC has yet to indicate when it may roll out.

Pilot paused

HMRC has temporarily paused the Making Tax Digital for income tax self-assessment (MTD for ITSA) pilot for newcomers.

In a statement, an HMRC official said the decision would allow the tax authority to refresh its testing strategy. They also plan to keep stakeholders updated about changes to the pilot process and how to get involved.

At the moment, only 137 businesses are part of the pilot – down from around 500 before the Covid-19 pandemic began.

While there is currently no set date for when it will reopen, a spokesperson confirmed that HMRC will build up the pilot ahead of MTD for ITSA rules coming into effect in 2026.

How to prepare

Although the current rules have remained largely the same for MTD in 2023, it doesn’t mean you can’t prepare yourself.

Now that you have the extra breathing space before MTD for ITSA becomes the norm, it’s best to familiarise yourself with the processes and software. So, when the time comes, you’ll feel confident knowing you have the skills and knowledge to comply with HMRC’s reporting requirements.

We’ve been helping businesses such as yours stay ahead when it comes to MTD, so we’d be happy to help you too.

Get in touch to discuss MTD for your business.

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