Making Tax Digital (for VAT)

Making Tax Digital (for VAT)

3rd June 2021

The introduction of ‘Making Tax Digital’ (MTD) is one of the biggest changes within our tax system since the introduction of Self-Assessment in 1995/96. It is a key part of the government’s goal to make tax administration more effective, more efficient, and simpler for taxpayers. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world.

The first phase of this project commenced on 1st April 2019 when VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) were required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

At this stage, VAT registered businesses with a taxable turnover below the VAT threshold were able to voluntarily join the Making Tax Digital scheme, if they so wished.

Changes effective 1st April 2022.

VAT-registered businesses with a taxable turnover of below £85,000 will also be required to follow Making Tax digital rules beginning with their first VAT Return for a period commencing on or after the 1st April 2022.

From this point, VAT registered business’ falling within this category will need to use MTD compatible software packages or other software (like spreadsheets) that connect to HMRC systems, to maintain your bookkeeping records and submit VAT Returns.

This change may well affect the way that you not only record but also report to HMRC and businesses who do not currently use any kind of digital software will be required to do so.

How this affects you

For many clients who fall within this bracket the forthcoming changes are likely to mean a move from traditional cash books to appropriate digital records and software.

If you do use software already you should be reviewing this and testing your systems to ensure that you will be compatible with HMRC's new software specification requirements.

Although the changes do not come into effect for another ten months you should, over the course of the next year, be working towards having appropriate systems or solutions in place and becoming familiar and confident with them.


There are various exemptions and exclusions from the requirement of MTD. One of these is that you are ‘digitally excluded’. Digital exclusion includes exclusions due to not having a reliable internet connection, not being able to use digital tools because of age or disability or if you find the technology too difficult.

How can we help?

We can support you in selecting an appropriate software solution suitable for your needs. For full software packages we recommend Sage products and can provide guidance on the level of package required and offer full training tailored to client specific requirements.

For clients who are unable to, or who do not want to, maintain their own digital records we are able to provide a quarterly bookkeeping & VAT service to take away the burden. As part of this service, we use a variety of digital tools to ensure the work is carried out as efficiently as possible, with an aim to also simplify the accounts preparation and year end process’ and keep client costs to a minimum.

Full HMRC guidance on the subject can be found at:

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