Making Tax Digital for VAT: the rules, and how to stay compliant

Making Tax Digital for VAT has been here the longest of all the MTD changes, and it is now simply how VAT works in the UK. If your business is registered for VAT, this applies to you. Here is what it means, without the jargon.

The short answer: every VAT-registered business must keep digital VAT records and file its VAT returns through MTD-compatible software.

Who it applies to

Making Tax Digital for VAT applies to all VAT-registered businesses. It does not matter whether you registered because you had to or because you chose to. If you are VAT registered, you are in.

When do you have to register for VAT?

You must register for VAT if your VAT taxable turnover goes over the registration threshold, which is currently £90,000 in any rolling 12-month period. The threshold rose from £85,000 to £90,000 in April 2024. You can also register voluntarily below that if it suits your business, for example to reclaim VAT on your costs.

There is also a deregistration threshold of £88,000, below which you can apply to come off VAT.

What Making Tax Digital for VAT requires

Three things:

1. Keep digital records. Your VAT records, such as sales and purchases with VAT, must be kept digitally in software, not on paper.
2. Use compatible software. Your VAT return must be submitted to HMRC through software that is recognised for MTD, rather than typed into the HMRC website by hand.
3. Keep a digital link. If information moves between programs, for example from a spreadsheet into your filing software, that transfer should be a digital link rather than manual copy and paste.

The bit that trips people up

The most common mistake is keeping a lovely digital record and then manually retyping the totals into a separate system at the end. Making Tax Digital wants the data to flow digitally from your records to your return, so the fewer manual steps, the safer you are.

What to do now

• If you are near £90,000 of taxable turnover, keep an eye on your rolling 12-month total so you register on time.
• If you are already registered, make sure your VAT records are kept in MTD-compatible software and that your returns are filed through it.
• Keep business and personal spending separate. It makes your VAT far easier to get right.

How Beri helps

Beri keeps digital VAT records as you go and produces return-ready figures, so you stay MTD compliant without wrestling with spreadsheets. Describe a transaction in plain English and Beri handles the VAT split behind the scenes.

Want VAT that looks after itself? Join the Beri waitlist for early access.

Related: Making Tax Digital, explained in plain English and the UK VAT registration threshold explained.

General information, not tax advice, and the rules can change. Check the latest on gov.uk or ask a qualified adviser about your situation.