If your business is VAT registered, you have to follow Making Tax Digital for VAT. That means digital records, compatible software and returns filed directly to HMRC. It is not complicated once set up, but it does change how you keep your books. Here is what the rules require, how they fit together and what to look out for.
Key takeaways
- VAT-registered businesses must keep digital records and file returns using MTD-compatible software.
- Figures must flow between software and spreadsheets through digital links, not by retyping.
- Returns are normally quarterly, with a deadline shortly after each period ends. Check your own dates in your VAT account.
- You can still use spreadsheets if you add bridging software.
- Good bookkeeping through the quarter makes the return quick to file.
What is Making Tax Digital for VAT?
Making Tax Digital (MTD) for VAT is HMRC's requirement that VAT records are kept digitally and VAT returns are submitted through software that connects to HMRC. You no longer fill in the figures on the old online form. Instead, your software calculates the nine boxes from your records and sends them. The official rules, including the list of required records, are on GOV.UK's Making Tax Digital for VAT guidance.
What you need to do
- Keep your VAT records digitally, in software or a spreadsheet.
- Use software that is compatible with MTD to submit your return.
- Make sure data moves between programs using digital links.
- Sign up to MTD for VAT with HMRC if you have not already, taking care with timing if you pay by Direct Debit.
- Submit each return and pay by the deadline.
Choosing software
HMRC publishes a list of compatible software, which includes full accounting packages and bridging tools that connect spreadsheets. The right choice depends on how you work. If you keep invoices in a cloud package, you will probably use its built-in VAT return. If you prefer spreadsheets, bridging software lets you keep that habit. For limited company owners, our guide to MTD software for limited companies compares the options in more detail.
Records and returns at a glance
| Step | What it means | Typical tool |
|---|---|---|
| Record | Log sales, purchases and VAT digitally | Accounting software or spreadsheet |
| Link | Move data automatically between tools | Digital links, import or bridging |
| Review | Check VAT codes and totals before filing | Your accountant or bookkeeper |
| Submit | Send the return to HMRC through software | MTD-compatible software |
| Pay | Pay any VAT due by the deadline | Direct Debit or bank transfer |
Worked example (illustrative)
"Hannah", an illustrative example, runs a small catering company and used to enter her VAT figures into HMRC's online form from a spreadsheet. Under MTD, she keeps her sales and purchases in cloud accounting software, with receipts photographed as she goes. At quarter end, she checks that each transaction has the right VAT code, then submits the return from the software in a few clicks. Her accountant reviews the figures first, so any errors are caught before filing. Because the records are already up to date, the whole process takes far less time than it used to, and she is not scrambling on the deadline day. See our guide to bookkeeping for a VAT registered business for good habits.
Choosing your scheme as well
MTD does not decide which VAT scheme you use. You may still choose between standard accounting and the Flat Rate Scheme, and the choice affects your records. Our comparison of the Flat Rate and standard schemes helps you decide, and our guide to the VAT registration threshold explains when registration becomes compulsory.
Common mistakes
- Retyping figures between tools. This breaks the digital link requirement. Copy and paste, import or use bridging software.
- Using the wrong VAT code. Software only calculates from what you enter, so incorrect codes give incorrect returns.
- Leaving everything to the deadline. Updating records weekly is far easier than rebuilding a quarter at once.
- Ignoring direct debit timing. If you pay by Direct Debit, set it up well in advance so payment is collected properly.
- Not keeping the right records. GOV.UK lists what has to be kept, including for the VAT scheme you use.
If you want someone to handle the records, review and submission, our VAT returns service does it for you, and our MTD compliance support keeps you aligned as HMRC's digital rules develop. For wider MTD changes, see the MTD for Income Tax eligibility guide.
Frequently Asked Questions
Who has to follow Making Tax Digital for VAT?
VAT-registered businesses have to keep digital records and file VAT returns using compatible software. This has applied to all VAT-registered businesses for some years. Check GOV.UK for any specific exemptions.
Can I still use spreadsheets?
Yes, if you use bridging software or another compatible tool that links the spreadsheet to HMRC digitally. You cannot type figures from a spreadsheet into the HMRC portal by hand. Check the current requirements on GOV.UK.
What are digital links?
Digital links are the automatic transfers of data between the software or spreadsheets you use for your VAT records. Copying and pasting is generally allowed, but retyping figures by hand between steps is not.
What records do I need to keep digitally?
You need digital records of items such as your business name and VAT number, the VAT scheme you use, the supplies you make and receive, and the VAT on them. GOV.UK sets out the full list of required records.
What happens if I file late or incorrectly?
HMRC operates a penalty points system for late returns and separate rules for late payment and interest. Check the current penalty rules on GOV.UK, and contact HMRC or your accountant promptly if you fall behind.
Related reading
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Schedule a consultation →Written by the Berber Accounts & Tax team, 124 City Road, London EC1V 2NX, United Kingdom.
Last reviewed: 3 October 2026.
This article is general information, not personal tax advice. Speak to a qualified accountant about your own circumstances before acting on it.