Making Tax Digital for VAT: what you must do

Who has to use Making Tax Digital for VAT

Every VAT-registered business has to use MTD for VAT, including businesses that registered voluntarily below the £90,000 threshold. It started in April 2019 for businesses above the threshold. It was extended to everyone else for VAT periods starting on or after 1 April 2022, so turnover no longer matters.

HMRC signs businesses up automatically. You do not need to apply, but you do need software that can talk to HMRC. HMRC closed its old online VAT return form for most businesses in November 2022. There is no longer a way to type figures into a gov.uk screen.

What software do you need

You need software that keeps your VAT records and sends your return to HMRC through its API. Most cloud bookkeeping packages do both. If you prefer a spreadsheet, bridging software can read its totals and submit them, as long as every link is digital.

An API is the connection HMRC opens to approved software. HMRC keeps a list of software that works with Making Tax Digital for VAT, including some free options with limited features.

Bridging software

Bridging software reads the totals from your spreadsheet and submits them to HMRC. This is legal as long as the spreadsheet itself holds the required digital records. The link from the spreadsheet to the bridging software must also be digital.

What records must you keep digitally

You must keep a digital record of every sale and purchase: the time of supply, the value and the VAT. You also record your business details, any VAT schemes and any adjustments. You do not have to scan paper invoices, but you must keep them for six years.

In full, the digital records are:

• your business name, principal place of business address and VAT registration number
• any VAT accounting schemes you use, such as the Flat Rate Scheme
• for each sale: the time of supply (the tax point), the value and the rate of VAT
• for each purchase: the time of supply, the value and the input VAT (the VAT you paid) you are claiming
• any adjustments you make to the figures on your return

The rule is about the data being recorded digitally, not about images of paper.

What counts as a digital link

A digital link moves data between programs without any manual step. Linked spreadsheet cells, file imports and exports, an emailed spreadsheet that is then imported, and API connections all count. Copying and pasting does not, and nor does typing figures from one program into another.

Once data is in your records, every move between programs must be digital. This catches out people who keep sales in one spreadsheet and copy totals into a second one to work out the return. Link the cells or import the file instead.

Who can be exempt from MTD for VAT

You can apply to HMRC for an exemption if using computers, keeping digital records or filing online is not reasonable or practical. HMRC accepts this in a small number of cases, broadly digital exclusion, religious objection and insolvency. If you are exempt, HMRC tells you how to file instead.

The grounds HMRC recognises are, broadly:

• digital exclusion, for example because of age, disability, remoteness of location or another reason
• religious objection to using computers or the internet
• the business is subject to an insolvency procedure

If HMRC already agreed you can file VAT returns by another method, you do not normally need to apply again. HMRC explains how in applying for an exemption from Making Tax Digital for VAT.

When are MTD VAT returns due

Your return and payment are due 1 calendar month and 7 days after the end of the VAT period. MTD changed how you file, not when. A quarter ending 31 March is due by 7 May, and the VAT deadline calculator works out any period.

Worked example

Say your VAT quarter ends on 30 June. Add 1 calendar month and you reach 31 July. Add 7 days and you reach 7 August. Your return must reach HMRC through your software by then, and the VAT must be in HMRC's account by the same date.

Penalties if you are late

Late returns earn penalty points. On quarterly returns, 4 points trigger a £200 penalty. Late payment penalties start at 3% of the unpaid VAT at day 15. The penalties guide and the VAT penalty calculator explain the rest.

Is e-invoicing coming to the UK

Yes. The government has announced mandatory e-invoicing for UK business-to-business (B2B) and business-to-government (B2G) invoices from April 2029. It is not law yet. The detail, including the format and which businesses are covered, still has to be set out in legislation.

If your MTD software creates invoices, ask your supplier whether it plans to support e-invoicing before 2029. A PDF sent by email is not an e-invoice in this sense. E-invoicing means structured data sent between systems.

Is MTD for Income Tax the same thing

No. MTD for Income Tax is a separate scheme with its own rules. It started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. Being in MTD for VAT does not put you into MTD for Income Tax, or the other way round.

What to do next

• Check your software is on HMRC's list and is connected to your VAT account.
• Make sure every link between your records and your return is digital.
• Put your next deadline in the diary using the VAT deadline calculator.
• If a return or payment is already late, work out the cost with the VAT penalty calculator.

This is general guidance. Check gov.uk or ask an accountant about your own case.

Figures in this guide come from our rules file, last checked against HMRC on 4 October 2026.