Making Tax Digital (MTD) for VAT is the first phase of HMRC’s wider Making Tax Digital initiative a government plan to make tax administration more effective, efficient, and easier for taxpayers.
Since April 2019, most VAT-registered businesses with a taxable turnover above the VAT threshold have been legally required to comply with MTD rules. If you run a VAT-registered business, chances are you’re already included in the MTD regime or you soon will be if you voluntarily register for VAT.
This guide explains:
Whether you’re new to VAT or just want to check you’re doing things right, this information will help you stay on track with HMRC’s digital rules.
Making Tax Digital (MTD) for VAT is a UK government requirement that changes how VAT-registered businesses keep records and file their VAT returns.
Under MTD for VAT, businesses must:
The goal is to reduce mistakes, cut down on paper records, and make VAT submissions more accurate and efficient by removing the risks that come with manual entry.
Tip: If you’re still using spreadsheets, you must link them to MTD-compliant bridging software that connects directly with HMRC’s systems.
For the latest rules, see GOV.UK: Making Tax Digital for VAT.
As of April 2022, all VAT-registered businesses in the UK must comply with Making Tax Digital (MTD) for VAT regardless of turnover.
Here’s how it breaks down:
| Business Type | MTD Requirement |
| VAT-registered and above the VAT threshold (£90,000 for 2025/26) | Mandatory since April 2019 |
| VAT-registered but below the threshold | Mandatory since April 2022 |
| Voluntarily registered for VAT | Must comply with MTD |
Key point: If you’re newly VAT-registered, MTD rules apply from your first full VAT period after registration so you’ll need to get your digital records and software in place straight away.
For the latest details, check GOV.UK: MTD for VAT.
To meet Making Tax Digital (MTD) for VAT requirements, you must use MTD-compatible software that can handle your VAT processes end-to-end from record-keeping to digital submission.
Your software must be able to:
If you’re still using spreadsheets, you can stay compliant, but you’ll need bridging software that creates a digital link between your spreadsheet and HMRC’s systems.
Tip: Switching to fully MTD-ready cloud software usually makes VAT submissions simpler and cuts out the risk of non-compliance.
See our MTD Compliant Software Guide for detailed comparisons and advice on choosing the right solution for your business.
Under Making Tax Digital (MTD) for VAT, you can no longer log into HMRC’s online portal and type in your VAT figures manually. Instead, you must file your VAT return directly through your MTD-compatible software which pulls your figures straight from your digital records and submits them using HMRC’s secure API.
Tip: Filing through your software reduces errors and helps ensure your returns meet HMRC’s digital links rules.
Here’s how to file an MTD VAT return step-by-step:
Missing an MTD VAT deadline can result in late filing penalties and interest charges, so make sure your digital setup is working properly ahead of each return.
For detailed instructions, see GOV.UK: Submit your VAT return or check our MTD VAT Filing Guide for practical tips.
Under MTD for VAT, your VAT return and payment are normally due:
Example: If your VAT quarter ends on 31 March, you must file your return and pay any VAT due by 7 May.
Missing the deadline can lead to penalties and interest, so it’s essential to plan ahead, keep your records up to date, and ensure your MTD software is ready to submit on time.
Learn more: See our MTD Deadlines and Key Dates guide to stay on track throughout the year.
HMRC expects all VAT-registered businesses to comply with Making Tax Digital (MTD) rules. Failure to do so can result in serious consequences for your business.
If you don’t comply with MTD for VAT, you could face:
Key point: The easiest way to avoid penalties is to make sure your systems, processes, and team are fully MTD-ready with compliant software and clear, accurate records.
Need help? See our MTD Compliant Software Guide or speak to an accountant to check your setup is correct.
Most VAT-registered businesses must follow MTD for VAT — but there are limited exemptions. You may be able to opt out if you can prove that it’s not reasonably practical for you to comply due to:
To get an exemption, you must apply directly to HMRC and provide evidence to support your request. Exemptions are granted case by case.
Read more: Check our MTD Exemptions Guide for step-by-step help on who qualifies and how to apply.
At Accounting Wise, we help UK businesses stay on top of MTD for VAT compliance with:
Whether you’re new to Making Tax Digital or just want peace of mind that your VAT returns are right, we’re here to help.
MTD for VAT is here to stay and staying compliant is the best way to avoid penalties, unnecessary stress, and missed deadlines.
Talk to Accounting Wise today to make sure you’re fully MTD for VAT ready and set up for smooth, digital VAT submissions.
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All VAT-registered businesses must follow MTD rules. This includes businesses with taxable turnover above the VAT threshold (£90,000 for 2024/25) and those who are voluntarily VAT-registered.
When did Making Tax Digital for VAT become mandatory?
MTD for VAT has been mandatory for most VAT-registered businesses since April 2019, and from April 2022 it became compulsory for all VAT-registered businesses, regardless of turnover.
What records do I need to keep digitally under MTD for VAT?
You must keep digital records of your business’s sales and purchases, the VAT on those transactions, and your VAT account. These records must be kept using compatible software.
What software can I use for Making Tax Digital for VAT?
You must use HMRC-approved compatible software. This can be cloud accounting software like Xero, QuickBooks, FreeAgent or similar or bridging software that links spreadsheets to HMRC.
How do I sign up for Making Tax Digital for VAT?
You can sign up through HMRC’s website. You’ll need your Government Gateway user ID, VAT number, and compatible software ready before you start.
Can I still submit my VAT returns through the HMRC website?
No once you’re under MTD, you must submit VAT returns through your compatible software. You can’t file them manually through your online VAT account anymore.
What happens if I don’t comply with MTD for VAT?
If you don’t comply, you may face penalties. HMRC has a points-based system for late submissions and payments, which can lead to fines if you repeatedly miss deadlines.
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