The short answer: every VAT-registered business must follow Making Tax Digital for VAT. That means keeping your VAT records digitally, sending VAT returns to HMRC through compatible software, and moving data between programs using digital links rather than retyping it. All VAT-registered businesses are now signed up automatically, unless HMRC has agreed an exemption.
Who has to follow the rules
Since April 2022, Making Tax Digital for VAT has applied to all VAT-registered businesses, whatever their turnover. HMRC says all VAT-registered businesses should now be signed up, and you no longer need to sign up yourself.
What you must do
- Keep digital records: your business name, address and VAT number, the VAT on each sale and purchase, and the totals and adjustments that make up your return.
- Use compatible software that keeps those records, prepares the VAT return from them and sends it to HMRC.
- Use digital links: once data is in your software, any transfer between programs must be digital.
Digital links: what counts
Manually transferring data within or between programs is not allowed, and copying and pasting does not count as a digital link. HMRC accepts, for example:
- linked cells in spreadsheets
- emailing a spreadsheet
- transferring digital records on a portable device
- importing and exporting XML or CSV files
- transfers through an API
Can I still use spreadsheets?
Yes. You can keep your VAT records in spreadsheets and use bridging software to send the return to HMRC, as long as the data flows through digital links. For most small businesses, accounting software such as Xero or QuickBooks is simpler: it keeps the records, prepares the return and submits it in one place.
Exemptions
HMRC may agree an exemption if it is not practical for you to use digital tools because of your location, a disability or your age, if your business is subject to an insolvency procedure, or if the business is run entirely by practising members of a religious society whose beliefs are incompatible with electronic communications.
Deadlines and penalties
Most businesses send a VAT return every 3 months. The deadline to submit and pay is usually one calendar month and 7 days after the end of the VAT period.
- Late returns: each late return earns a penalty point. The threshold is 2 points for annual returns, 4 for quarterly and 5 for monthly. At the threshold you get a £200 penalty, and another £200 for each late return after that.
- Late payment: no penalty if you pay within 15 days. From day 16 to 30, a penalty of 3% of the VAT owed at day 15. From day 31, a further 3% of what is still owed at day 30, plus a second penalty at 10% a year on the outstanding balance. Interest is charged from the first day the payment is late.
How we help
We set you up in Making Tax Digital software, connect your bank feeds, keep your records and prepare and submit your VAT returns on time. VAT returns are included in our small business accounting package from £99 a month. See our VAT accountant service.
Sources: gov.uk, VAT Notice 700/22: Making Tax Digital for VAT; Penalty points and penalties if you submit your VAT Return late; How late payment penalties work if you pay VAT late. Checked 6 October 2026.
Common questions
Do I need Making Tax Digital for VAT if my turnover is below £90,000?
Yes, if you are VAT-registered. The rules apply to all VAT-registered businesses, including those that registered voluntarily.
Is copying and pasting into a VAT return allowed?
No. Copying and pasting does not count as a digital link. Data must move between programs digitally, for example through linked cells, file imports or software connections.
Can I use a spreadsheet for MTD for VAT?
Yes, with bridging software to send the return to HMRC, as long as the spreadsheet uses digital links.
What happens if I file a VAT return late?
You get a penalty point. Once you reach the threshold (4 points for quarterly returns) you get a £200 penalty, and another £200 for each late return while you stay at the threshold.
General information only, not personal advice. Tax rules, rates and thresholds change, so check gov.uk or speak to us about your own situation.