MTD FOR VAT — STAYING COMPLIANT BEYOND THE BASICS

Making Tax Digital for VAT (MTD VAT) has been in effect for all VAT-registered businesses for several years and remains one of the most established parts of the MTD programme.

Under MTD VAT, businesses must keep digital records of their VAT transactions and submit VAT returns digitally using software that complies with HMRC’s digital requirements. This means you can’t simply file returns manually or through HMRC’s online portal without compatible software — the entire process must be digital.

But compliance goes beyond just submitting VAT returns. HMRC expects businesses to maintain accurate digital records and ensure there are digital links between different software systems. This means spreadsheets can be used only if they connect directly to other systems without manual copy-paste — essentially ensuring the flow of data stays fully electronic from start to finish.

Even though the obligation is established, many businesses still misunderstand what “digital record-keeping” means. You must capture your VAT data in compatible software and ensure that the way you record sales and purchases is aligned with MTD requirements. Keeping digital records correctly throughout the year also supports better financial insight and can make VAT return preparation smoother and less stressful.

As MTD expands into Income Tax, the importance of good digital bookkeeping carries over. The habits and systems you build now for VAT can form a strong foundation for future requirements under MTD for Income Tax, helping you stay organised and compliant throughout the tax year.