What is MTD for tax returns?

From 1 April 2022, all businesses that need to file a VAT return must now file it through MTD (Making Tax Digital).

This was originally introduced back in 2019, for entities whose turnover was over £85,000. HMRC have now extended the filing requirement for all entities that are VAT registered.

The purpose of MTD (according to HMRC) is to ‘help businesses eliminate common errors and save time managing their tax affairs’.

Use approved HMRC software

Before April 2022, it was possible for smaller businesses to file their VAT return from their HMRC VAT portal. However, VAT returns must now be filed using an approved HMRC software.

If you do not file your business' VAT return through MTD, you may be charged a penalty for failure to do so.

There are various accounting software packages that enable you to file your VAT return through MTD, as well as bridging software that connects non-compatible programs (like spreadsheets) to HMRC systems.


There are certain exemptions to the MTD rule and if you previously had an exemption to file online, the exemption will continue to apply to you. If you believe you may be eligible for exemption, we would suggest you contact HMRC straight away, to get this approved.

We would also suggest you speak to your accountant to see if they have a preferred software for you to use. They will have the knowledge and experience of the various types, and will be able to guide you to the best one for you.

Getting used to new software may take time and, therefore, we suggest you do this as soon as possible rather than waiting until your VAT return is due to be filed.

A reminder: this applies to all VAT returns starting on or after 1 April 2022.

Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the Contact Us page on our website.

Chantal Baker is the director and founder of Champ Consultants Ltd, an accountancy and tax consultancy practice in Caterham. Please follow us on the various social media channels

Chantal Baker from Champ Consultants

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