Making Tax Digital

What Is Making Tax Digital in the UK

The UK government introduced Making Tax Digital (MTD) with the aim of making filing VAT returns easier and more efficient for businesses. The regulation requires businesses to keep digital records and submit VAT returns via compatible software.
More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through Making Tax Digital compatible software so far.

All You Need to Know

Making Tax Digital requires businesses to manage their tax affairs with HMRC using compatible software.

MTD applies to all VAT-registered businesses

All VAT-registered businesses must comply with MTD for VAT rules, unless they are exempt.

Maintaining digital records

VAT-registered businesses are required by law to maintain their digital records.

Using MTD software

Businesses need to use compatible, HMRC-recognised MTD software to keep digital records and file VAT returns.

Signing up for MTD

HMRC automatically signs up VAT-registered businesses for Making Tax Digital.

When and Who is Impacted by MTD?

First to be impacted by MTD were small businesses and individuals with turnover above the VAT threshold of 85,000 pounds. They had to keep digital records for VAT purposes since 2019. In short, all VAT-registered businesses have to follow MTD rules for their first return starting from April 2022.
Self-employed businesses and property owners with annual business or property
revenue over 50,000 pounds will have to follow MTD rules starting from 6 April 2026. Similarly it will apply the same for those earning 30,000 pounds but not until April 2027.
For more information, please visit the HMRC website.

Learn More

Making Tax Digital (MTD): Quick facts

MTD requires every VAT registered business to record and submit VAT returns electronically using ‘functional compatible software’.
Companies must use software to keep digital records of specified VAT-related documents
Stored records must include designatory data and summary VAT data for the period.
Each business must set up a new digital tax account and should follow a new authentication process.
Submission of digital records can be in a range of digital formats, including XML, CSV, and Excel, provided they are API enabled.
Use of multiple pieces of software is allowed