Making Tax Digital VAT Returns

MTD For VAT Returns: Rules, Records and Deadlines

By Oroni Chowdjury · Reviewed by Shamayun Chowdhury, CIMA · Tax year 2026/27 · Last reviewed [9/24/2026]

Quick answer

Making Tax Digital VAT returns must be prepared from digital records and sent to HMRC through compatible software. Every VAT-registered business has been inside these rules since 1 April 2022, whatever its turnover. The old HMRC portal route closed, so VAT and Making Tax Digital now travel together for anyone holding a VAT number.

On this page

1. Is Making Tax Digital for VAT compulsory?
2. Making Tax Digital VAT requirements
3. The records HMRC expects, and the VAT notice behind them
4. How to make tax digital for VAT: submission in practice
5. VAT deadlines: staggers, monthly and annual filers
6. Correcting a mistake on a return
7. Making Tax Digital VAT for small businesses
8. Is Making Tax Digital only for VAT?
9. What late returns and late payments cost
10. Five mistakes that cause most VAT problems
11. Help from MTDFix
12. VAT FAQs

Is Making Tax Digital for VAT compulsory?

Yes, for every business with a VAT registration. The making tax digital VAT HMRC rules, sometimes written as HMRC VAT Making Tax Digital, arrived in two waves: April 2019 for businesses trading above the registration threshold, then April 2022 for everyone else with a VAT number, including voluntary registrations.

That second date is the one people forget. Register voluntarily on £40,000 of sales and UK VAT MTD applies to you from the first return, exactly as it does to a business turning over millions. The current registration threshold is £90,000 of taxable turnover on a rolling twelve-month basis, but crossing it is not what triggers the digital rules. Holding the registration is.

A small number of businesses sit outside, mainly where HMRC has granted an exemption on grounds such as age, disability, remoteness, religious belief or insolvency. As with every part of the scheme, you apply and HMRC decides.

Overseas sellers get no gentler treatment. A business with no UK establishment has no registration threshold at all, so VAT registration is due from the first UK sale, and the digital rules come with it. VAT groups and registered divisions are also inside, with the representative member filing one return from digital records.

Signing up, and letting an accountant file

Register for VAT today and HMRC enrols you for the digital rules as part of the process, so there is nothing separate to join. Older registrations that predate the change are already enrolled too. What you do need to do is link your software to HMRC, which means signing in with your Government Gateway details once and granting the software permission to file.

If an accountant files for you, the authorisation runs the other way: you approve them as your agent through HMRC, and the returns then leave their software using your records. You still sign off the figures. Our guide to signing up for Making Tax Digital walks through the equivalent steps on the Income Tax side.

Making Tax Digital VAT requirements

Three obligations sit at the heart of HMRC Making Tax Digital for VAT.

HMRC does not sell software of its own. It publishes a list of compatible products on GOV.UK, ranging from free tools for simple businesses to full accounting systems, and any of them satisfies the rule provided it can file through HMRC’s API.

One point often missed: the “soft landing” that once allowed figures to be copied and pasted between systems ended years ago. Since April 2021 every link in the chain, from your records to the final return, has had to be digital.

Nothing in the making tax digital UK VAT rules, or the making tax digital VAT UK guidance you will see elsewhere, changes how VAT itself works. Your scheme, your rates, your reclaim position and your deadlines are untouched. What changed is the plumbing between your books and HMRC.

The records HMRC expects, and the VAT notice behind them

The rulebook is the making tax digital VAT notice, published by HMRC as VAT Notice 700/22. Parts of it carry the force of law, so it is worth a read before you design your process. According to that VAT notice, Making Tax Digital records must include:

• Your business name, principal address and VAT registration number
• The VAT scheme you use, such as standard, cash accounting or flat rate
• For each sale: the tax point, the value excluding VAT and the rate charged
• For each purchase: the tax point, the value and the input tax you intend to reclaim
• Any adjustments, summarised, with the workings kept outside the digital records if you prefer

Search for “VAT notice making tax digital” and you land on the same document; there is only one. Two practical points save most of the arguments. First, you do not have to store scanned invoices digitally, though many businesses do; the requirement is that the transaction record itself is electronic. Second, a spreadsheet is still allowed, so long as bridging software carries the figures to HMRC without anyone retyping them.

How to make tax digital for VAT: submission in practice

Making Tax Digital VAT submission follows the same rhythm each quarter.

1. Record as you go. Sales and purchases land in your software during the period, ideally through a bank feed.
2. Reconcile before the period closes. Check the bank, chase missing purchase invoices, review anything uncategorised.
3. Review the nine boxes. Your software builds the return; you check the figures make sense against the quarter’s trading. The boxes cover VAT due on sales (1), VAT due on acquisitions from Northern Ireland from EU member states (2), the total of those two (3), VAT reclaimed on purchases (4), the net figure to pay or reclaim (5), total sales excluding VAT (6), total purchases excluding VAT (7), and the two remaining boxes for goods supplied to and acquired from the EU under the Northern Ireland Protocol (8 and 9).
4. Submit through the software. The return travels to HMRC directly. Submitting VAT returns Making Tax Digital style means there is no separate login to the old portal.
5. Pay by the deadline. For most businesses the return and payment are both due one calendar month and seven days after the period ends.

Each VAT return Making Tax Digital sends on your behalf carries a receipt number when HMRC accepts it, and HMRC Making Tax Digital VAT returns are only counted as filed once that arrives. Keep it. It is the quickest evidence that a return was filed on time if a query arises later.

VAT deadlines: staggers, monthly and annual filers

Most businesses file quarterly, and HMRC allocates them to one of three stagger groups when they register. The return and the payment share the same deadline: one calendar month and seven days after the period ends.

Paying by direct debit? HMRC collects a few working days after the filing deadline, and the return has to be filed first, so leaving submission until the seventh is cutting it fine. If the deadline lands on a weekend or bank holiday, cleared funds must reach HMRC by the last working day before it.

Correcting a mistake on a return

Errors are normal and most are fixed without penalty. If the net value of the errors from earlier returns is £10,000 or less, or below £50,000 where it is under 1% of your box 6 figure, you simply adjust it on your next return. Anything larger, and anything deliberate, is reported separately to HMRC on form VAT652.

Deliberate errors are treated very differently from careless ones, so disclose early if a real mistake has been found. Keep a note of what went wrong and how you corrected it, in case HMRC asks later.

Making Tax Digital VAT for small businesses

For a small business, the cost of MTD is rarely the software. It is the habits. Three things make the difference between a smooth quarter and a lost weekend:

• A separate business bank account, feeding transactions straight into the software.
• Weekly, not quarterly, bookkeeping. Twenty minutes a week keeps the VAT return honest and the reclaim complete.
• A rule for awkward items, such as fuel, entertaining and mixed-use purchases, applied consistently rather than reinvented each quarter.

Illustrative example

A café registered voluntarily for VAT to reclaim tax on its fit-out. Turnover is £62,000, well under the registration threshold, so the owner assumed the digital rules did not apply. They do, from the first return after registration. Once the till system was linked to the bookkeeping software, each quarterly return took about half an hour. Details are invented to explain the rule.

Is Making Tax Digital only for VAT?

No, not any more. UK Making Tax Digital VAT duties were the first stage, and for several years it was the whole of Making Tax Digital in practice. Income Tax joined on 6 April 2026 for sole traders and landlords with gross trade and rental income above £50,000, with lower limits following in 2027 and 2028.

The two parts run side by side and are judged separately. A VAT-registered builder files quarterly VAT returns under one set of rules and, if his income clears the limit, quarterly Income Tax updates under another. Our guides to MTD for Income Tax and the Making Tax Digital thresholds cover that side, and our overview of what is Making Tax Digital sets out the whole programme.

What late returns and late payments cost

Since January 2023, late VAT returns have been handled through penalty points rather than automatic surcharges. Each return filed after its deadline adds a point. Nothing is charged for the point itself, but once a business filing quarterly reaches four points, a £200 penalty follows, and another £200 lands with each further late return while the points remain.

Points do not sit on your record forever. Below the threshold, each one drops off around 24 months after the missed deadline. Once you are at the threshold, they only clear after a full period of compliance, which is 12 months of on-time returns for a quarterly filer, plus every return due in the previous 24 months being filed.

Paying late is charged separately, and the rates rose in April 2025:

• Nothing for the first 15 days, provided you pay or agree a payment plan in that window
• 3% of the VAT still outstanding at day 15, and a further 3% of what remains at day 30
• From day 31, a second penalty building daily at 10% a year until the balance clears
• Late payment interest on top, at the Bank of England base rate plus four points, running from the first overdue day

The two regimes are independent, so file on time even when the money is not there, then call HMRC about the balance. A payment plan proposed before day 15 stops the penalties starting.

There are also penalties specific to the digital rules themselves, for filing without functional compatible software or for failing to keep digital records and links. In practice HMRC has said it will not chase record-keeping penalties where a business is clearly trying to comply. The Income Tax side has its own points regime, explained on our page about Making Tax Digital penalties.

Five mistakes that cause most VAT problems

1. Breaking a digital link by retyping a total from a spreadsheet, till report or stock system into the accounts.
2. Using the invoice date when the scheme says otherwise. Cash accounting turns on payment dates; retail schemes use daily gross takings. Mixing the two distorts every box.
3. Reclaiming VAT without a valid invoice, or on items blocked by law such as most business entertainment.
4. Letting personal spending drift into the business account, which inflates box 4 and invites questions.
5. Filing late because a purchase invoice is missing. File the return on time and correct the figure later; a missing invoice is not a reasonable excuse.

Help from MTDFix

MTDFix looks after VAT and Making Tax Digital together for small businesses across the UK. We set up the software, keep the records, prepare each return for your approval and file it as your HMRC agent, so nothing turns on you remembering a deadline in a busy month.

VAT returns

Fixed quote

• Software set up and linked to HMRC
• Bookkeeping kept current
• Quarterly returns prepared and filed
• Scheme review, including flat rate and cash accounting

Priced on transaction volume. Ask for a figure before you commit.

Also inside MTD for Income Tax

£15 a month

• Quarterly updates filed
• Software included
• Year-end tax return

Want the wider service? Speak to a Making Tax Digital accountant at MTDFix.

Hand your VAT returns to us

Tell us your VAT scheme and roughly how many transactions you handle each quarter, and you will get a fixed quote before any work starts.

📞 0116 403 0595  |  📧 mtdfix@yahoo.com  |  🌐 mtdfix.com

MTDFix, 6 Egginton Street, Leicester, LE5 5BA · Working with businesses UK-wide

VAT FAQs

Can I still file a VAT return on the HMRC website?

No. Returns now leave your software and travel to HMRC through its API. The old manual route is closed to VAT-registered businesses.

Is a spreadsheet still acceptable?

Yes, paired with bridging software. The link between the spreadsheet and HMRC has to be digital, so nobody retypes the nine box figures.

Does the flat rate scheme change what I keep?

The records are lighter, because you are not reclaiming input tax on most purchases, but the digital record and digital submission rules still apply in full.

I deregistered from VAT. What happens to the digital rules?

They stop with the registration, which you can apply to cancel once taxable turnover falls below £88,000. Keep the records you already hold for six years, in case HMRC asks.

Do annual accounting scheme users have to comply?

Yes. One return a year rather than four, but it still comes from digital records and goes through compatible software.

Can my accountant file the return for me?

Yes, once you authorise them as your agent. They file from their own software using your digital records, and you stay responsible for the figures.

General guidance on the VAT rules as they stand in 2026, not advice for your own business. Schemes, partial exemption and sector rules can change the answer, so take advice where your position is unusual.

The practical takeaway

VAT under Making Tax Digital rewards routine more than expertise. Record transactions as they happen, keep the links between your systems digital, file by the seventh even on a bad quarter, and the penalty regime never touches you. The businesses that struggle are almost always the ones catching up on three months of paperwork in the week the return is due.

If that describes your quarter, the fix is either a tighter weekly habit or someone else keeping the records. Either works. Doing neither is what costs money.

About the author

Written by Marina Jahan · Reviewed by Shamayun Chowdhury

Written by Oroni Chowdhury, Eternity Accountants.
Reviewed by Shamayun Chowdhury, Senior Accountant at Major Accountancy and Lecturer in Accounting at Nottingham Trent University. CIMA qualified. Based in Leicester, England.

• CIMA qualified accountant with 15+ years of UK practice experience
• Lecturer in Accounting, Nottingham Trent University
• Senior Accountant at Major Accountancy, Leicester
• 500+ UK businesses supported across Self Assessment, Corporation Tax, VAT, and MTD compliance
• LinkedIn: Shamayun Chowdhury on LinkedIn
• Facebook: Shamayun Chowdhury on Facebook

Last reviewed: [9/24/2026]

Sources

• HMRC VAT Notice 700/22 on digital records and returns (GOV.UK)
• HMRC guidance on Making Tax Digital for Income Tax (GOV.UK)
• CIOT Tax Adviser on updates to Notice 700/22