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MTD VAT Returns

If you are VAT registered you may be wondering: What is MTD VAT? When do I have to do Making Tax Digital VAT Returns? And how do I do MTD VAT Returns? MTD stands for Making Tax Digital and we’ll explain all you need to know about it below.

MTD VAT

What is MTD?

Making Tax Digital is HMRC’s initiative to get every business and business owner (including landlords) keeping digital records and submitting all tax returns online. The digital records need to be linked to the numbers submitted on the return, so essentially you have to use online accounting software. It applied to MTD VAT returns first but plans are in place to apply it to income tax (2024) and corporation tax (2026). Eventually everyone that needs to submit a tax return will be submitting quarterly MTD tax returns and a finalised one for the year.

MTD VAT

MTD VAT Returns are already required for all VAT registered businesses with annual sales of over £85,000. From 1st April 2022 MTD VAT will start to apply to all VAT registered businesses, regardless of their annual sales.

When do I have to do MTD VAT returns?

As mentioned above, MTD VAT returns already apply if annual sales are over £85,000. Also, it already applies if you have voluntarily signed up for it. For everyone else it, there’s a staggered start, depending on your VAT period and frequency. In a nutshell it applies from the VAT period starting on or after 1st April 2022.

So here is your first MTD VAT return if you submit a VAT return:

  • Quarterly to Mar/Jun/Sep/Dec – June 2022
  • Quarterly to Apr/Jul/Oct/Jan- July 2022
  • Quarterly to May/Aug/Nov/Feb – August 2022
  • Monthly – April 2022
  • Annually – March 2023 or one of the 11 months following depending on which month your annual VAT returns go up to.

When do I have to sign up for MTD VAT?

When to actually sign up for MTD isn’t as straight forward as you would think! You need to wait until your last non-MTD return has been submitted and paid. If that’s by direct debit the payments could be as late as the 13th. So, if you do quarterly returns, sign up no sooner than one month and 13 days after the last quarter end. For existing direct debits to continue working, you need to sign up at least 7 days before the first MTD VAT due date, so that’s 1 month after the first quarter end. So there’s about a 10 week window in which you need to sign up.

How to do MTD Returns

You could spend hours fiddling around with spreadsheets and formulas and ‘bridging software’ to submit your totals to HMRC. That’s after spending hours actually completing the spreadsheets. Or you could use free online accounting software like Pandle. We can get you Pandle Pro with automatic bank feeds for just £2.50 per month. Also, Xero Accounting is easy to use and available from as little as £9 per month (through us). You’ll save so much time using online accounting software, that those prices will be worth it.

We’ve specialised in online accounting software since we started business in 2013. It saves our clients time, it save us time, and so it makes our accountancy fees cheaper (from £20pcm). If you’d like advice on which software to choose and how to use it, please get in touch. We can also sign you up for MTD and do your VAT Returns for you (from an extra £10pcm).