Last updated: 16 February 2026
Making Tax Digital for VAT requires all VAT-registered businesses to keep digital records and submit VAT returns using MTD-compatible software. This has been mandatory since April 2022 for all VAT-registered businesses, regardless of turnover.
Who needs to comply with MTD for VAT?
Every VAT-registered business must use MTD for VAT. This includes:
- Businesses with taxable turnover above the VAT registration threshold of £90,000 (from 1 April 2024)
- Businesses voluntarily registered for VAT with turnover below the threshold
- Sole traders, partnerships, and limited companies registered for VAT
If you are registered for VAT, you must use MTD-compatible software to submit your returns. There are no exemptions based on business size.
What does MTD for VAT require?
Under MTD for VAT, you must:
- Keep digital records — maintain a digital record of all sales and purchases, the VAT you owe, and what you can reclaim
- Use compatible software — submit VAT returns through MTD-compatible software that connects to HMRC via their API
- Maintain digital links — any transfer of data between software programs must be digital (no manual re-keying)
You cannot submit a VAT return through the HMRC online portal if you are mandated for MTD. The return must go through compatible software.
How MTD for VAT differs from MTD for Income Tax
MTD for VAT has been in place since 2019 and is well established. MTD for Income Tax, which begins in April 2026, is a separate requirement that applies to sole traders and landlords based on their qualifying income. The two operate independently — if you are both VAT-registered and self-employed, you may need to comply with both.
Penalties for non-compliance
HMRC can issue penalties if you fail to submit VAT returns through MTD-compatible software when required to do so. Late VAT returns and late payments are subject to HMRC’s existing penalty regime for VAT.
For details on the penalty system, see our penalties page.
Getting started with MTD for VAT
If you are already submitting VAT returns through compatible software, you are compliant. If you are still using the HMRC online portal, you need to:
- Choose MTD-compatible software
- Sign up for MTD for VAT on GOV.UK
- Authorise your software to submit returns on your behalf
Have questions about how MTD for VAT interacts with MTD for Income Tax? See our frequently asked questions.
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