Making Tax Digital (MTD) for VAT requires VAT-registered businesses in the UK to keep their VAT records digitally and to submit VAT returns to HMRC using MTD-compatible software — not by typing figures into the old HMRC online form. It has applied to every VAT-registered business since April 2022, whatever its turnover.
Rates, thresholds and deadlines below are correct at the time of writing. HMRC updates them regularly, so confirm the current figures on GOV.UK or with your accountant before you file or pay. This guide is general information, not tax advice.
Any business registered for VAT in the UK. You must register for VAT when your taxable turnover exceeds the £90,000 registration threshold (in force from 1 April 2024), and you can register voluntarily below it. Once you are registered, MTD applies from your first return. A small number of businesses can be exempt, for example on religious or practical grounds, but they must apply to HMRC.
ETaxFlow posts every sale and bill to your double-entry ledger and your VAT return data at the same time.
| Rate | Applies to (examples) |
|---|---|
| Standard 20% | Most goods and services |
| Reduced 5% | Domestic fuel and power, children’s car seats, some energy-saving materials |
| Zero-rated 0% | Most food, books, children’s clothing, exports. You still record and report these sales |
| Exempt | Insurance, some education and health services. Outside the VAT return calculation but still recorded |
Most businesses file quarterly. The return and any payment are due one calendar month and seven days after the end of the VAT period. If you pay by Direct Debit, set it up well before the deadline so it is collected on time. Businesses on the Annual Accounting Scheme file one return a year and pay in instalments.
HMRC uses a penalty points system for late VAT returns. Each late return earns a point; for quarterly filers, reaching four points triggers a £200 penalty, and a further £200 for each late return after that while you remain at the threshold. Late payment is dealt with separately, with penalties that grow the longer the VAT stays unpaid, plus interest.
A spreadsheet can be part of an MTD process only if it is linked to bridging software that submits to HMRC and the digital links rule is met. Most businesses find it simpler to keep records and file from one accounting system.
MTD is also being extended to Income Tax Self Assessment for sole traders and landlords: from April 2026 for those with qualifying income above £50,000, then lower thresholds in later years. If you are a sole trader who is also VAT-registered, plan for both.
| Step | What happens |
|---|---|
| 1. Record every sale and bill | Each invoice captured with the correct VAT rate per line |
| 2. Reconcile the bank | Payments and receipts matched so nothing is missing from the VAT records |
| 3. Review the VAT control account | Output and input VAT reconciled to the VAT liability |
| 4. Check the draft return | Boxes 1–9 reviewed before the period closes |
| 5. Submit through MTD software | Return filed to HMRC by the deadline; payment scheduled |
| 6. Lock the period | Prevents late edits and keeps the audit trail clean |
Every VAT-registered business in the UK. MTD for VAT has applied to all VAT-registered businesses since April 2022, regardless of turnover.
Taxable turnover of £90,000 over a rolling 12 months (from 1 April 2024). You can also register voluntarily below the threshold.
Only if they are connected to MTD-compatible bridging software that submits the return to HMRC and the digital links rule is met. You can no longer enter figures manually on the HMRC online form.
Usually one calendar month and seven days after the end of your VAT period. Payment is due by the same date.
Each late return earns one point. For quarterly filers, four points triggers a £200 penalty, with a further £200 for each late return while you stay at the threshold. Late payment penalties are separate.