What is Making Tax Digital for VAT?

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**Making Tax Digital (MTD) for VAT** is HMRC's programme requiring VAT-registered businesses to maintain digital records and file VAT returns using MTD-compatible software. **Timeline:** - **April 2019:** Mandatory for VAT-registered businesses with taxable turnover above £85,000 - **April 2022:** Extended to **all VAT-registered businesses**, regardless of turnover - There is no opt-out once registered for VAT — MTD for VAT is compulsory **What digital records must include:** - Business name, address, VAT registration number - Details of each supply: date, description, net value, VAT rate and amount - Reverse charge transactions - Import/export details **Compatible software options:** Approved software includes QuickBooks, Xero, Sage, FreeAgent, and many others. **Bridging software** exists for businesses that use spreadsheets — it connects the spreadsheet data to HMRC's API. **Penalties for MTD non-compliance:** From 2024, HMRC uses a points-based penalty system for late VAT submissions — accumulating points lead to financial penalties. **MTD for Income Tax Self Assessment (MTD ITSA):** MTD is being extended to income tax: - **April 2026:** Mandatory for self-employed/landlords with combined income above **£50,000** - **April 2027:** Those earning above **£30,000** - Quarterly digital income/expense updates to HMRC will replace the annual SA100 return **Voluntary MTD:** Businesses below the compulsory thresholds can voluntarily sign up for MTD for VAT to benefit from digital record automation.

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