Making Tax Digital for VAT: A Practical UK Guide for 2026

Making tax digital vat compliance is about more than filing a VAT return online. It connects your digital transaction records to compatible software and the return you submit to HMRC. A spreadsheet may form part of that process, but it needs to work within the digital-link rules.

If you’re unsure which records to keep digitally, whether your software setup is suitable or how to avoid missed deadlines, a clear routine can make the requirements easier to manage. Start by tracing how sales and purchases move from their source documents into your VAT figures. This can reveal where records are missing, information is re-entered or responsibilities are unclear.

This guide explains who must follow MTD for VAT, what records to keep and how digital links work. It compares practical software workflows and sets out steps for organising bookkeeping, checking figures and meeting deadlines. It also explains how MTD for Income Tax is separate from VAT. For businesses in Manchester, Stockport, Wilmslow and Alderley Edge, consistent bookkeeping, cloud accounting and tax compliance support can help bring more order to the VAT process.

What Making Tax Digital for VAT means for your business

Making Tax Digital (MTD) for VAT is HMRC’s system for keeping VAT records digitally and using compatible software to submit returns. It links your bookkeeping to the return, rather than treating online submission as the whole process. You need to consider how transactions are recorded, how figures move between systems and how the return is filed.

MTD for VAT applies to VAT-registered businesses, whatever their taxable turnover, unless HMRC has granted an exemption or a specific rule applies. The mandate has applied to all VAT-registered businesses since April 2022. The general VAT registration threshold is a separate test: it is £90,000 of taxable turnover over a rolling 12-month period, although special rules apply, including to some overseas businesses. Reaching or staying below the registration threshold does not itself determine whether an already registered business must use MTD.

Who needs to follow Making Tax Digital for VAT?

If your business is VAT-registered, you should expect to keep digital VAT records and file through MTD-compatible software. This includes businesses that registered voluntarily as well as those required to register because of turnover. Some people may qualify for an exemption under HMRC’s rules, and special cases can have their own treatment. Check current HMRC guidance if you think an exemption may apply, rather than assuming a paper-based process is permitted.

The wider Making Tax Digital overview on Wikipedia describes the programme’s history and implementation. Use HMRC guidance for current obligations and exemption criteria.

What does digital VAT compliance involve?

Think of compliance as three connected parts: digital records, compatible software and digital submission. For each supply, the digital record must include the time of supply, its value and the rate of VAT charged. The software must support the relevant MTD process, including sending the VAT return to HMRC. Typing totals into an online return may not meet the record-keeping requirement if the underlying VAT records are kept only on paper.

Digital links matter when records pass between software. If you use more than one system, the transfer must preserve the digital journey. Manually re-typing or copying and pasting figures between systems doesn’t meet the digital-link requirement. This can affect a business that uses a spreadsheet for transaction records and separate software to submit its return. The key question is how figures get from one stage to the next, not simply which tools you use.

A consistent bookkeeping routine keeps transaction information organised and ready for review. Bookkeeping support can help bring structure to your records, while cloud accounting can help organise the workflow. HMRC’s rules also require VAT records to be retained for at least six years, so your process should support reliable access to them over time.

How MTD for VAT records and returns work in practice

A reliable VAT return starts with the transactions behind it. Sales, purchases and VAT amounts need to be recorded and carried through to the return in a way that lets you review how the figures were compiled. Regular checks make it easier to spot gaps before submission, rather than reconstructing the quarter from bank statements at the last minute.

A practical MTD for VAT workflow takes transactions from digital records, through checks and calculations, to a reviewed return submitted using compatible software. The tools may differ between businesses, but each stage should connect clearly to the next.

Which VAT records should be kept digitally?

Record the details of each supply digitally, including its time, value and the rate of VAT charged. In day-to-day bookkeeping, keep sales and purchase entries organised so the VAT treatment and amount can be traced to the underlying transaction. Invoices and receipts support those entries, while clear descriptions make it easier to identify unusual or missing items.

Record categories and retention requirements can depend on your circumstances. Refer to HMRC’s official MTD for VAT guidance for current rules. A bank feed or a folder of scanned paperwork does not necessarily contain every required digital record.

How does a VAT return move from records to submission?

A regular routine turns transaction entries into a return that’s ready for review. For example, a small business might close its books at the end of each VAT period, check that sales and purchase records are complete, then compare the resulting figures with the return shown by its accounting software or bridging workflow.

1. Enter transactions. Record sales and purchases promptly, using source documents to support the details and VAT treatment.
2. Reconcile the records. Compare bookkeeping entries with bank activity and available invoices or receipts. Investigate unexplained differences instead of carrying them forward.
3. Review the return figures. Check totals against the business’s records. Look for missing invoices, duplicate entries, unusual changes and inconsistent VAT treatment.
4. Submit and retain the working records. Use the relevant software workflow to send the return, then keep supporting records so the figures can be understood later.

A bridging workflow may transfer figures from records held elsewhere into software used for submission. Understand how information moves between the records, calculations and return, and whether the complete process meets HMRC’s digital-link requirements. Manual copying can create errors and may break the required digital journey, so map each hand-off before relying on it.

For businesses in Manchester, Stockport, Wilmslow and Alderley Edge, bookkeeping support can help organise transaction records and regular checks. A clearer routine helps identify items that need attention before submission.

MTD for VAT software options: compare workflows before choosing

The right setup keeps VAT records organised and carries figures through to submission in a way that meets HMRC’s rules. Full accounting software may bring bookkeeping and VAT reporting together. A bridging tool may suit a business that keeps records in another digital format, provided the complete workflow meets the digital-link requirements. Compare the work involved, not just the software label.

When might accounting software suit a business?

Integrated accounting software may suit a business that wants to record sales and purchases, organise bookkeeping and prepare VAT figures within one workflow. Before choosing, consider who will enter transactions, how staff will access and check records, and whether the reports make it easier to review figures. Software is useful when it fits the way your business operates. Cloud accounting support can help you assess how the system fits with your wider bookkeeping routine.

When might a bridging workflow be considered?

Bridging software generally connects digital records, such as figures held in a spreadsheet, with a service used to submit a VAT return. It may let a business keep its existing digital bookkeeping format, but it doesn’t make every spreadsheet compliant. The records, transfers between systems and complete process must meet current HMRC requirements. The Association of Taxation Technicians explains key points in its guidance on MTD for VAT.

Workflow	Practical strengths	Points to consider
Full accounting software	Bookkeeping and VAT preparation may sit within one workflow, with reports to help review figures.	Records still need to be entered and checked consistently. Consider staff access, reporting needs and how the software fits existing processes.
Digital records with bridging software	May let a business retain its existing digital bookkeeping format and connect figures to VAT submission.	Check every hand-off between records and submission. Manual re-keying or copying and pasting may fail digital-link requirements.

Before changing systems, map how a typical transaction moves from its source record to the VAT return. Note where figures are created, transferred, adjusted and reviewed. Compare the workflow with HMRC’s current software and record-keeping rules in its MTD for VAT guidance. This can show whether the process needs adjustment, even if the software itself is compatible.

Coombs Chartered Accountants provides cloud accounting, bookkeeping and tax compliance support to help businesses bring their records and VAT reporting workflow together. Discuss your VAT workflow with the team.

Prepare for MTD for VAT with a practical checklist

Buying software is only one part of a compliant VAT process. Records, transfers between systems, responsibilities for checks and return submission all need to work together. Before changing anything, trace how a transaction currently travels from invoice or receipt to the VAT return. This review can reveal gaps without requiring an unnecessary overhaul.

Start by mapping your records, checking the software workflow, assigning responsibilities and setting a regular review routine before submitting through your chosen process.

What should you check before changing your VAT process?

Follow a recent sale and purchase from the original invoice or receipt through bookkeeping and into the VAT figures. Note where information is entered, transferred or adjusted. Flag disconnected spreadsheets, manual re-typing, missing supporting documents and recurring reconciliation problems. Then compare the proposed workflow with HMRC’s current requirements for compatible software and digital links, rather than relying on a software label alone.

1. Review the tools. Identify where transaction records are created, where VAT figures are calculated and how the return is submitted. Check that the complete workflow supports MTD requirements.
2. Organise source records. Set a consistent method for recording sales, purchases and VAT information, and retaining documents that support entries.
3. Assign responsibilities. Decide who enters transactions, who reviews VAT treatment and who prepares and submits the return.
4. Schedule checks. Choose review points that suit the volume and pattern of your transactions. Resolve missing invoices and unexplained differences before the return is due.
5. Plan submission. Allow time to review the return and submit it using the chosen MTD-compatible process. VAT returns and payment are typically due one calendar month and seven days after the end of the accounting period.

How can you keep VAT records organised throughout the period?

Build record-keeping into the normal working week or month, rather than leaving a backlog until the VAT period closes. The right frequency depends on transaction volume, staffing and how promptly paperwork arrives. Give someone clear responsibility for checking that entries are supported and VAT codes are applied consistently, with a colleague able to cover the process when needed.

At each review, compare bookkeeping records with available invoices, receipts and bank activity. Follow up differences while the source information is easier to find. Keep a brief note of corrections or unresolved queries so the person preparing the return can see what still needs attention. Consistent bookkeeping support can help maintain an orderly routine as the business’s needs change.

A practical first step is to map one transaction from source document to return, then record each manual hand-off and compare it with the digital-link rules. Coombs Chartered Accountants provides bookkeeping and accounting support to help businesses review their records and routines. Discuss your VAT process with Coombs.

MTD for VAT support in Manchester and Stockport

Knowing the rules is one thing; fitting them into the way your business works is another. A clear VAT routine brings bookkeeping, software and review responsibilities together, so you can see what needs attention and who is responsible. Tax compliance support can make the practical demands of making tax digital vat easier to understand and manage, while recognising that each business has its own processes.

Coombs Chartered Accountants supports businesses in Manchester, Stockport, Wilmslow and Alderley Edge. Reviewing your existing records and workflow can focus attention on the steps that matter to your business, from clarifying responsibilities to improving record organisation and reviewing how VAT figures reach a return.

What can an accountant help you review?

An accountant can review how sales and purchase records are maintained, how VAT treatment is checked and how information moves through your bookkeeping and software. The review can also clarify who prepares the figures, who checks them and who submits the return. Tax compliance support helps businesses manage recurring obligations with a considered routine grounded in their actual processes.

This can be useful when VAT tasks are shared across a small team, records arrive through different channels or corrections keep appearing at period end. The aim is to identify unclear or inconsistent parts of the workflow and consider practical improvements. Advice can help you understand the process and responsibilities, but it can’t replace accurate source records or remove the need for appropriate checks.

How to move from uncertainty to a manageable VAT process

You don’t need to redesign everything before seeking guidance. A few examples of how work is currently done can make the discussion more specific. Bring together:

• The names or types of software and spreadsheets used for bookkeeping and VAT.
• A sample of sales and purchase records, with supporting invoices or receipts.
• A simple outline of how figures move from source documents to the VAT return.
• Questions about unclear responsibilities, manual steps or recurring reconciliation issues.

With this information, you can identify what works well and where the process may need refinement. For example, if one person records invoices and another prepares the return, mapping their handover can show where review responsibilities or supporting information need to be clearer. Practical changes might include adjusting the existing routine, improving record-keeping or reviewing whether the software workflow suits the business.

Coombs provides tailored accounting support that connects bookkeeping records with VAT review and your software process. To talk through your current setup and next steps, discuss your VAT requirements.

Make your next VAT steps clear

A workable making tax digital vat process should fit the way your business operates, not add unnecessary steps to an already busy routine. Choose one practical next action: map how transactions move through your records, clarify who reviews the figures or identify where your bookkeeping workflow needs attention. Addressing a specific gap is often more manageable than changing everything at once.

Coombs Chartered Accountants helps businesses bring bookkeeping, cloud accounting and tax compliance into a clearer working routine. Support is tailored to businesses across Manchester, Stockport, Wilmslow and Alderley Edge, helping make VAT responsibilities easier to understand and manage.

Ready to review your process? Talk to Coombs Chartered Accountants about your VAT workflow and agree a practical next step.

Frequently Asked Questions

Is Making Tax Digital for VAT compulsory for VAT-registered businesses?

Yes, MTD for VAT has applied to VAT-registered businesses since April 2022, regardless of turnover, unless an HMRC exemption or specific rule applies. This includes businesses that registered voluntarily, not only those whose turnover passed the VAT registration threshold. For example, a small firm that chose to register still needs to consider its MTD record-keeping and filing process. Check current HMRC guidance if you think an exemption may apply.

Can I use spreadsheets for Making Tax Digital for VAT?

Yes, spreadsheets may form part of a compliant process, but they must be used with software that can submit the return and preserve the required digital links. Manually copying figures from a spreadsheet into another system, or re-typing them, doesn’t meet the digital-link rule. Trace how figures move through your workflow and confirm that the arrangement meets current HMRC requirements.

Do I need to keep digital copies of every VAT receipt?

Not necessarily. MTD requires specified VAT information to be recorded digitally, but that doesn’t mean every paper receipt must automatically be scanned just for MTD. Keep supporting documents in a way that lets you substantiate your bookkeeping entries and meet your wider VAT record-keeping duties. If a purchase entry is queried, for instance, you should be able to locate the receipt or invoice and explain how you treated it.

What happens if my accounting software is not compatible with MTD for VAT?

You’ll need to change the workflow so your VAT return can be submitted using MTD-compatible software. Depending on your records and setup, that may mean moving to compatible accounting software or using a suitable bridging arrangement. An online HMRC account or a spreadsheet alone is not enough. HMRC may charge a penalty of up to £400 for each return not filed using compatible software, so review your process promptly.

How do I submit a VAT return under Making Tax Digital?

Prepare the return figures from your digital VAT records, check them against your bookkeeping and supporting documents, then submit through MTD-compatible software. Keep a record of the submission and note any figures or transactions that needed investigation, so you can follow up consistently next period. If someone else submits on your behalf, agree who checks the figures and who monitors the submission and payment deadlines.

Does Making Tax Digital for VAT include Making Tax Digital for Income Tax?

No. They are separate obligations, even if the same business owner is affected by both. From 6 April 2026, MTD for Income Tax applies to self-employed people and landlords with qualifying gross income over £50,000, subject to the rules for that scheme. A VAT-registered sole trader could therefore need to consider two different digital tax processes. Check the requirements for each separately rather than assuming VAT arrangements cover Income Tax.

Can an accountant help my business comply with Making Tax Digital for VAT?

Yes. An accountant can review your bookkeeping routine, clarify who is responsible for records and checks, and assess how your software workflow handles VAT reporting. That can be useful if your team is unsure where figures are entered or who reviews them before submission. Coombs Chartered Accountants supports businesses across Manchester, Stockport, Wilmslow and Alderley Edge with bookkeeping, cloud accounting and tax compliance support tailored to business needs.