What if I use a spreadsheet for my VAT records?

You can still use a spreadsheet, but it must be digitally linked to MTD-compatible bridging software that can submit your VAT return to HMRC. You cannot manually copy and paste figures from your spreadsheet into the submission software.

What happens if I miss a VAT deadline?

HMRC operates a points-based penalty system for late VAT return submissions. If you miss a deadline, you will receive a penalty point. Once you reach a certain threshold of points (e.g., four points for quarterly reporters), you will incur a fixed financial penalty, currently £200. Interest may also be charged on late payments.

How do I know if my software is MTD-compatible?

HMRC provides a list of software providers that offer MTD-compatible solutions. You should check with your software provider or refer to the gov.uk website to ensure your chosen software meets the requirements.

Can my accountant handle MTD for VAT for me?

Yes, your accountant can act as your agent and submit your MTD for VAT returns on your behalf using their own MTD-compatible software. This is a common and often recommended approach to ensure compliance.

Do I need to sign up for MTD for VAT?

HMRC's VAT registration service automatically signs up newly registered taxpayers for MTD for VAT. HMRC has also signed up all remaining VAT-registered businesses, so there is no longer a separate sign-up step required for most businesses.

How long do I need to keep my digital VAT records?

You must retain your VAT records for six years, as set by the VAT Regulations 1995. Under MTD, some of these records must be kept digitally within functional compatible software.

Making Tax Digital for VAT: what it means and how to stay compliant

What is Making Tax Digital for VAT?

Making Tax Digital (MTD) is a government initiative to modernise the UK tax system, making it easier for businesses and individuals to manage their tax affairs. For VAT, this means a move away from traditional paper-based record-keeping and manual online submissions.

Since April 2022, MTD for VAT has been mandatory for all VAT-registered businesses, regardless of their turnover. This means if your business is registered for VAT, you must comply with MTD rules.

Key MTD for VAT requirements

To stay compliant with MTD for VAT, your business needs to meet three core requirements:

Keep digital records: You must maintain certain VAT records digitally within "functional compatible software". This includes details like your business name, VAT number, VAT accounting schemes used, and VAT on sales and purchases. These records must be kept digitally from the point of transaction.
Use MTD-compatible software: You must use software that is recognised by HMRC as MTD-compatible. This software will connect directly to HMRC's systems (via an Application Programming Interface, or API) to submit your VAT returns.
Maintain digital links: If you use more than one piece of software in your VAT accounting process (e.g., a spreadsheet for calculations and separate submission software), there must be a digital link between them. Manual re-keying of data between systems is not permitted once data has been entered into compatible software.

Who needs to comply?

All businesses registered for VAT in the UK must comply with MTD for VAT. This includes sole traders, limited companies, and contractors. Even if your taxable turnover is below the VAT registration threshold, if you are voluntarily VAT-registered, you still need to follow MTD rules.

The current VAT registration threshold is £90,000 (per gov.uk, 2026/27). If your taxable turnover exceeds this amount in any 12-month period, you must register for VAT and, consequently, comply with MTD for VAT.

Exemptions from MTD for VAT

There are limited circumstances where a business may be exempt from MTD for VAT. These typically apply if:

It's not practical to use digital tools due to age, disability, or remote location.
The business is subject to an insolvency procedure.
The business is run by members of a religious society whose beliefs are incompatible with electronic communications.

If you believe you qualify for an exemption, you must apply to HMRC.

Submitting your VAT return under MTD

The process for submitting your VAT return under MTD is different from the old online portal. You can no longer use HMRC's old VAT online account for quarterly or monthly returns.

Keep digital records: Throughout your VAT period, ensure all relevant transactions are recorded digitally in your MTD-compatible software.
Prepare your return: Your software will use your digital records to prepare the nine-box summary for your VAT return.
Submit via software: Your VAT return must be submitted directly to HMRC through your MTD-compatible software.
Receive confirmation: After submission, your software will receive a confirmation from HMRC, including a unique receipt number.

VAT return deadlines

For most businesses filing quarterly, your VAT return and payment are due one calendar month and seven days after the end of your VAT accounting period.

For example, if your VAT quarter ends on:

31 March 2026, your return and payment are due by 7 May 2026.
30 June 2026, your return and payment are due by 7 August 2026.
30 September 2026, your return and payment are due by 7 November 2026.
31 December 2026, your return and payment are due by 7 February 2027.

If the 7th falls on a weekend or bank holiday, the deadline moves to the next working day.

Common mistakes

Not using compatible software: Attempting to submit VAT returns through the old HMRC online portal or manually. This is no longer permitted for MTD-mandated businesses.
Lack of digital links: Manually transferring data between spreadsheets and submission software, rather than using digital links.
Incomplete digital records: Not keeping all required VAT records digitally from the outset of a transaction.
Missing deadlines: Forgetting that both the submission and payment have the same deadline.
Confusing MTD for VAT with MTD for Income Tax: While MTD for Income Tax Self Assessment (ITSA) is rolling out from April 2026, it is a separate obligation from MTD for VAT.

Frequently asked questions

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