What does HMRC MTD for VAT mean?

Making Tax Digital (MTD) for VAT is a program from HMRC that says businesses that are registered for VAT must:

Keep records of digital VAT

Use MTD-compatible software to file your VAT returns.

Use digital links to connect records and submissions.

Who has to follow the rules?

If you want to pay VAT, you have to use MTD.

You must register for VAT, no matter how much money you make (this became required for all VAT-registered businesses in April 2022).

This includes:

Single traders

Companies with limited liability

Partnerships

Landlords who pay VAT

What you need to do

You need to keep records like these:

Name of the business, address, and VAT number

Used VAT accounting plans

Sales and purchases are subject to VAT.

You must keep these records in a digital format (spreadsheets are okay).

You can no longer send your VAT returns directly through the HMRC VAT portal.

Some of the options that are accepted are:

Software for accounting, like Xero, QuickBooks, and Sage

Bridging software links spreadsheets to HMRC.

The software sends VAT returns directly to HMRC through an API.

Fines

HMRC now has a system of penalties based on points:

Late submissions get penalty points.

Points go back to zero after a time of compliance.

You also have to pay interest on late payments.