Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system by requiring businesses to keep digital records and submit returns using compatible software. For VAT-registered businesses, MTD is already in effect. Understanding what it means for your business admin is an important part of staying compliant.
This guide covers the basics of Making Tax Digital for VAT. It is not tax advice — always speak to a qualified accountant or tax adviser for guidance specific to your situation.
What Is Making Tax Digital for VAT?
Making Tax Digital for VAT (MTD for VAT) requires VAT-registered businesses to:
- Keep VAT records digitally
- Submit VAT returns to HMRC using MTD-compatible software
MTD for VAT applies to all VAT-registered businesses, regardless of turnover. If you are VAT-registered, you are required to comply.
What Counts as Digital Record Keeping?
Digital record keeping means storing your VAT records in a format that is compatible with MTD software, rather than on paper or in a basic spreadsheet that is not linked to your submission process. You must keep digital records of:
- Your business name, address, and VAT registration number
- VAT accounting scheme used
- VAT on sales (output tax)
- VAT on purchases (input tax)
- Adjustments made to your VAT account
What Software Do You Need?
You need to use software that is recognised by HMRC as MTD-compatible. Many accounting packages — such as Xero, QuickBooks, Sage, and FreeAgent — support MTD for VAT. Some businesses use bridging software to connect existing spreadsheets to HMRC's systems, though a fully integrated accounting package is generally simpler to manage.
HMRC maintains a list of compatible software on GOV.UK.
How Does MTD Affect VAT Submissions?
Under MTD, you can no longer submit VAT returns manually through your Government Gateway account in the traditional way. Returns must be submitted directly from your MTD-compatible software. The deadlines remain the same — one month and seven days after the end of each VAT quarter.
What About Making Tax Digital for Income Tax?
HMRC is extending Making Tax Digital to Income Tax Self Assessment (MTD for ITSA). From 6 April 2026, MTD for Income Tax applies to sole traders and landlords with annual self-employment and property income over £50,000. This will require quarterly updates to HMRC in addition to an annual return, using compatible software.
If you are a sole trader or landlord approaching this threshold, it is worth speaking to your accountant now to prepare.
Keeping Your Business Address Up to Date
HMRC will send MTD-related correspondence, including notices about your VAT account and any compliance queries, to your registered business address. Keeping that address monitored and up to date ensures you do not miss important communications.
A professional registered office address service handles your HMRC correspondence reliably, so nothing is missed. View our registered office address services →
Summary
Making Tax Digital for VAT is now a requirement for all VAT-registered businesses. The key steps are to use MTD-compatible software, keep your VAT records digitally, and submit returns through that software rather than manually.
If you are not yet set up for MTD or are unsure whether your current software is compatible, speak to your accountant who can help you get compliant.
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