MTD for VAT: a 2026 UK business guide
MTD for VAT has been mandatory for every UK VAT-registered business since April 2022 - no turnover threshold, no exceptions for the smallest businesses. If you charge VAT, HMRC expects digital records and software-based submissions. Here's exactly what that means and how to stay compliant.
By Mehmet Demir · Last reviewed: 2 May 2026 · Source: HMRC · Methodology
Bottom line
If your business is VAT-registered in the UK, MTD for VAT applies to you. You must:
- Keep digital records of all VAT transactions.
- Use HMRC-recognised software to submit VAT returns.
- Maintain unbroken digital links between source data and the submission.
There is no minimum turnover. Voluntary VAT registrations are also in scope.
How to register for MTD for VAT
A step-by-step walkthrough of signing up your VAT-registered business for Making Tax Digital.
- 1
Choose MTD-compatible software
Pick from HMRC's recognised list, Xero, QuickBooks, FreeAgent, Sage, or bridging software for spreadsheets. Compare features and pricing before committing.
- 2
Sign in to HMRC online services
Log into your HMRC business tax account at gov.uk. You'll need your Government Gateway ID and password.
- 3
Sign up for MTD for VAT
Follow the "Sign up your business for MTD for VAT" link. You'll need your VAT number, business email, and the date your VAT period starts.
- 4
Wait for HMRC confirmation
HMRC sends a confirmation email within 72 hours. Do not file your next VAT return until you receive it, filing through the old system after signing up causes errors.
- 5
Connect your software to HMRC
In your accounting software's VAT or settings menu, choose "Connect to HMRC" or "Authorise". You'll be redirected to HMRC to grant access.
- 6
File your first MTD VAT return
When the next VAT period ends, prepare your return in your software and click submit. Confirm receipt in your HMRC account.
The "digital links" rule
HMRC requires the data path from your source records to the final VAT return to be fully digital. Manually retyping figures from one spreadsheet into another breaks the digital link and is not compliant. Acceptable digital links include:
- Cell formulas and references inside a spreadsheet.
- Linked or imported data between spreadsheets and accounting software.
- Bridging software submitting from a spreadsheet to HMRC.
- Direct integrations between accounting software and HMRC's APIs.
Choosing software
- Cloud accounting platforms, Xero, QuickBooks, FreeAgent, and Sage handle invoicing, banking feeds, and VAT submissions in one place.
- Bridging software, useful if you already keep records in Excel and don't want to switch. Tools like VitalTax, 123 Sheets, and Absolute Excel VAT Filer bolt onto your existing spreadsheet.
- Industry-specific systems, many retail, hospitality, and construction packages now include MTD for VAT support natively. Check before assuming you need a separate accounting tool.
Common compliance pitfalls
- Manual copy-paste between systems. Common between point-of-sale systems and accounting software, replace with an export/import or API integration.
- Old desktop software. Sage 50 and other legacy products require an MTD-ready version. Check your edition is supported.
- Forgetting bridging software updates. HMRC API changes occasionally break older bridging tools, keep them current.
FAQs
Who has to follow MTD for VAT?v
What counts as MTD-compatible software?v
Can I still use spreadsheets?v
What are the penalties for non-compliance?v
Do I have to keep digital records of every transaction?v
How do I sign up?v
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Start the check →This guide is general information, not professional tax advice. Always verify against HMRC's official guidance or speak to a qualified accountant.