MTD for VAT is mandatory for every VAT-registered business in the UK since 1 April 2022 — regardless of turnover. If you're VAT-registered, you must keep digital records and file VAT returns using HMRC-recognised software. Here is everything HMRC requires.
Per HMRC's published MTD for VAT guidance, the requirements are straightforward — but non-compliance is common, particularly around the digital links rule.
HMRC's soft landing for the digital links requirement ended in April 2021 for most businesses. Since then, the full digital links requirement has applied. Businesses still manually copying VAT data between systems without a digital link are in breach of MTD for VAT requirements, even if their VAT returns are otherwise accurate. See HMRC's MTD VAT guidance on GOV.UK.
Per HMRC's published guidance, a digital link means data must be electronically transferred or exchanged between software components without any manual re-entry. HMRC defines both permitted and prohibited methods.
You can keep records in a spreadsheet and use HMRC-recognised bridging software to submit. The spreadsheet and bridging software must be linked (via a data connection, API, or direct import) — the total must flow automatically, not be retyped.
✓ Permitted by HMRCAccounting software that keeps digital records and submits VAT returns directly to HMRC via the MTD API is the most common compliant route. All major providers (Xero, QuickBooks, FreeAgent, Sage) support this. Per HMRC's guidance, this is the simplest compliant approach.
✓ Permitted by HMRCLarger businesses often use separate systems for different functions (point of sale, inventory, finance, VAT). This is permitted provided all components are digitally linked throughout the chain — every data transfer must be electronic, not manual.
✓ Permitted if digitally linked throughoutCopying VAT figures from one spreadsheet to another, from a spreadsheet to the HMRC portal, or from any system to another via manual data entry — without an electronic link — breaks the digital links requirement.
✗ Breaks digital links ruleManually submitting VAT returns through the old HMRC online portal (typing figures into the web form) does not comply with MTD for VAT. All submissions must be made via the MTD API through HMRC-recognised software.
✗ Non-compliant since April 2019/2022Emailing a spreadsheet to a bookkeeper who then manually re-enters the figures into accounting software breaks the digital links chain. The export from the source system must connect electronically to the next component without a human re-entering numbers.
✗ Breaks digital links rulePer HMRC's published guidance, MTD for VAT applies to all VAT accounting methods. All common VAT schemes are compatible with MTD — your software must support your specific scheme.
| VAT Scheme | MTD Compatible? | Software Notes | Key Feature |
|---|---|---|---|
| Standard VAT (accruals) | ✓ Compatible | All major MTD software supports this | VAT calculated on invoices raised/received, not paid |
| Cash Accounting Scheme | ✓ Compatible | Supported by all major providers | VAT calculated when payment actually received/made |
| Flat Rate Scheme (FRS) | ✓ Compatible | Supported by major providers — verify your flat rate % | Fixed % of gross turnover — simpler for small businesses |
| Annual Accounting Scheme | ✓ Compatible | One VAT return/year — MTD software handles this | File one VAT return per year with quarterly payments |
| VAT Margin Scheme | ⚠️ Check provider | Not all software supports margin scheme — verify before subscribing | VAT charged on margin (profit) not selling price |
| VAT MOSS (Mini One Stop Shop) | ⚠️ Check guidance | Post-Brexit MOSS changes mean UK businesses use UK MOSS — check HMRC's current guidance | Digital services sold to EU consumers |
| Group VAT | ✓ Major providers | Xero, Sage support group VAT — check tier. QuickBooks — limited | Multiple entities submitting single VAT return |
This guide summarises HMRC's published MTD for VAT requirements. For a review of your specific setup — software, digital links, and VAT scheme compatibility — our free matching service connects you with verified VAT specialists and bookkeepers.
Informational guide only — not personalised VAT or tax guidance. This page summarises HMRC's published MTD for VAT requirements with direct GOV.UK source links. VAT compliance depends on your specific business structure, schemes, and software. Always verify your compliance position on GOV.UK and consult a qualified tax professional or bookkeeper before acting. UK Tax Hero is not regulated by HMRC, the FCA, or any professional body.
