Making Tax Digital for VAT – Penalties From April 2021

Imagine standing at the edge of a financial precipice, the winds of change blowing hard, threatening to push you over into a chasm of penalties and surcharges. This is the position you may find yourself in with the introduction of the new penalty system for Making Tax Digital (MTD) for UK VAT from April 2021.

As you balance precariously, it’s vital to understand these new rules, the mistakes that could tip you over the edge, and the measures you can take to maintain your balance.

But what are these errors, and how can you avoid them? Stay with us to find out how you can navigate this challenging landscape.

Key Takeaways

  • New penalty system introduced for MTD for VAT from April 2021
  • Understanding the rules and consequences of the new penalty system is crucial
  • Potential fines under the new penalty system can have financial repercussions
  • Navigating the complexities of the MTD penalty system and staying compliant is essential to avoid penalties.


As we move forward, it’s imperative to understand the key aspects of Making Tax Digital (MTD) penalties.

Recognizing the specifics of this new system, which took effect from April 2021, is crucial to avoid unnecessary financial repercussions.

Let’s discuss the penalty structure, the potential fines, and how guidance can help you steer clear of these penalties.

Key Aspects of MTD Penalties

Understanding the key aspects of MTD penalties is crucial for businesses, especially since the introduction of a stricter penalty system for VAT returns from April 2021. These include:

  1. New penalties for MTD for VAT late submissions.
  2. An accumulated points system for repeated offences.
  3. Higher penalties of the VAT due for careless or deliberate inaccuracies.
  4. The application of the new penalty regime from 1st April 2021.

Guidance on Avoiding Penalties

Navigating the complexities of the new MTD penalty system can be daunting, but with the right knowledge and tools, you can minimize the risk of accruing fines for late or inaccurate VAT submissions.

Ensuring timely submissions, observing the MTD rules, and understanding the points system that applies to your business are key to avoiding penalties.

Always remember, a late submission penalty can be costly, so stay ahead and remain compliant.

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Frequently Asked Questions

What Is the Penalty for MTD for Vat?

You’ll face penalties for not complying with MTD for VAT rules. These can include fines up to 100% of the VAT due, or a point-based surcharge for repeated faults within a 12-month period.

Can I Submit a VAT Return Without Mtd?

Yes, you can submit a VAT return without MTD during the transition period. However, you’re still liable for penalties if you don’t comply with the rules. It’s best to start using MTD to avoid fines.

How Can I Avoid VAT Penalty?

To avoid a VAT penalty, ensure timely and accurate filings. Understand VAT legislation thoroughly. If unsure, seek professional advice. Consider using compliance solutions like Avalara to help navigate VAT obligations and avoid penalties.

Does VAT Have to Be Digital?

Yes, VAT must be digital. The UK VAT implemented Making Tax Digital for VAT in April 2019. You’re required to keep digital records and submit VAT returns through compatible software. It’s crucial to avoid potential penalties.


In conclusion, the MTD penalty system for VAT, introduced in April 2021, can pose significant challenges and potential costs for your business. However, with Avalara’s expert guidance, you can navigate these complexities and ensure compliance.

We’re committed to helping you avoid any costly errors and penalties. Remember, staying informed and proactive is key to successfully managing your VAT obligations.

Barry Caldwell

Barry Caldwell

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