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Making Tax Digital for VAT deadlines

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Making Tax Digital for VAT deadlines

In April 2022, Making Tax Digital (MTD) for VAT changed.

It now includes significantly more businesses compared to before.

Those who have voluntarily registered for VAT need to follow its guidelines.

This includes businesses below the £85,000 VAT registration threshold.

Eligible businesses are going to have to understand the importance and timeliness of MTD for VAT, and ensure they meet the deadlines – including registering on time.

Here’s what we cover:

Key dates to know for MTD for VAT

Your timeline for preparing for MTD for VAT

MTD for VAT deadlines: FAQs

Final thoughts on MTD deadlines

Key dates to know for MTD for VAT

Let’s take a look at some of the key dates around Making Tax Digital that you need to know.

This includes those deadlines coming up that you’ll need to be aware of so you can remain compliant with MTD.

You should also view Sage’s MTD Hub to ensure you keep on top of key dates.

  • May 2015: The chancellor announces the “death of the annual tax return” and impending digitalisation of VAT, Income Tax and Corporation Tax within five years. Therefore, Making Tax Digital is created and plans are made to start rolling it out.
  • December 2015: HMRC launches personal tax accounts, by which individual taxpayers can manage tax online (e.g. PAYE codes, National Insurance contributions records, etc).
  • April 2019: Making Tax Digital for VAT came into effect. Most businesses over the £85,000 VAT threshold had to begin following the rules for their first full VAT period after this date. MTD-compatible software must be used for filing VAT Returns, and relevant VAT accounting records must be kept digitally.
  • October 2019: MTD for VAT came into effect for businesses that were deferred in April 2019. This list mostly comprises larger businesses and organisations, such as group companies and public sector organisations.
  • April 2021: The soft landing period came to an end. Prior to this, it was possible for those using MTD for VAT to manually copy and paste data. But after this date, the movement of data from one place to another must be both automated and digital—something known as digital linking.
  • April 2022: MTD for VAT was extended to all VAT-registered businesses. This includes those that were voluntarily registered for VAT. The rules and requirements of MTD for VAT remain the same: for the first full VAT period following April 2022, any individual or business registered for VAT must use MTD-compatible software for filing VAT Returns, and relevant VAT accounting records must be kept digitally.
  • January 2023: A new penalty system applies to Making Tax Digital late submissions. It means that those missing a deadline earn a penalty point. Once a given threshold has been passed, a financial penalty of £200 is automatically applied.
  • April 2024: Making Tax Digital for Income Tax (also known as Making Tax Digital for Income Tax Self Assessment) begins for sole traders and landlords with gross income of over £10,000 per year. This is separate to MTD for VAT, and has its own rules and regulations.
  • April 2025: MTD for Income Tax is extended to general partnerships that again have income over £10,000 per year.
  • April 2025: The penalty system that began in January 2023 is extended beyond MTD and applies to all those using the Self Assessment system.
  • April 2026: This is the earliest date that Making Tax Digital for Corporation Tax could begin, in that the government has said it won’t start prior to this. This will affect incorporates businesses that are liable for corporation tax.

Will the government extend MTD for Income Tax to other individuals and businesses, such as those earning below £10,000?

Or those who use Self Assessment for other things, such as declaring interest on investments, or if they have salaries over £100,000?

It’s possible.

But there have been no announcements and therefore we don’t have any dates for when this might happen.

However, the experience of the rollout of MTD for VAT over several years indicates this may be likely.

Making Tax Digital for VAT software

Discover how Sage Accounting can help you get your MTD for VAT submission right, calculate your bill and submit your VAT Return with ease.

Find out more

Your timeline for preparing for MTD for VAT

Here are dates for your diary if you’re switching to MTD for VAT.

First, you need to sign up for MTD for VAT.

No, this doesn’t happen automatically.

Prior to signing up, you need to have selected which MTD-compatible software you’re going to use, because HMRC won’t let you proceed otherwise.

Once you’ve signed up for MTD for VAT, you need to activate that feature in the software. Speak to the software vendor if you have any questions on this.

If you have an accountant who handles your VAT, they can sign up on your behalf, and subsequently file returns on your behalf, like they might’ve done before. Just ask them.

But do remember that this doesn’t remove the requirement for you to keep relevant VAT records digitally.  

The deadlines for signing up to MTD for VAT are peculiar, but are in place to avoid you paying twice on your current VAT Return.

Assuming you’re paying by direct debit, you shouldn’t sign up less than:

  • Seven days before your return is due
  • Five days after your return is due.

For those switching as of April 2022, for example, MTD for VAT only applies for the first full VAT period after that date.

For those that file quarterly VAT Returns, this means the following start dates:

  • 1 April 2022: If the previous VAT quarter ended 31 March 2022.
  • 1 May 2022: If the previous VAT quarter ended 30 April 2022.
  • 1 June 2022: If the previous VAT quarter ended 31 May 2022.

Because there’s still a need to file VAT Returns by one calendar month and seven days, at the latest, this means the initial VAT Returns for MTD for VAT must be filed by the following:

  • 7 August 2022 for a VAT quarter beginning 1 April 2022.
  • 7 September 2022 for a VAT quarter beginning 1 May 2022.
  • 7 October 2022 for a VAT quarter beginning 1 June 2022.

As another example, for those who file monthly VAT Returns, the first MTD for VAT submission deadlines are earlier:

  • 7 June 2022 for a VAT month beginning 1 April 2022.
  • 7 July 2022 for a VAT month period beginning 1 May 2022.
  • 7 August 2022 for a VAT month period beginning 1 June 2022.

If you’re new to using MTD for VAT software, this is the first time you’ll be required to create a VAT Return with it.

But don’t worry, this is usually very straightforward.

MTD for VAT deadlines: FAQs

Here are the answers to some frequently asked questions about MTD for VAT and its deadlines.

Is Making Tax Digital just for VAT?

No. VAT was selected by the government for the first wave of Making Tax Digital, but income tax and corporation tax both have their own MTD schemes, and therefore their own deadlines.

MTD for Income Tax is due to begin in April 2024, while MTD for Corporation Tax won’t begin any sooner than April 2026.

Keep an eye on Sage’s MTD Hub for an up-to-date listing of all the current MTD deadlines.

Who needs to register for Making Tax Digital for VAT?

Since April 2022, virtually all individuals and businesses that are registered for VAT need to register for and follow the MTD for VAT rules.

This includes those that are voluntarily registered for VAT.

Prior to April 2022, only businesses that were over the VAT threshold (currently £85,000) needed to register for MTD for VAT (although voluntary registration was possible).

If you’re in any doubt, see our separate article about MTD thresholds.

What was the soft landing period for MTD for VAT?

Back in 2019, the government announced that it would let businesses keep using copy and paste to move data from one place to another without contravening the Making Tax Digital legislation.

Under the MTD legislation, this is not allowed. It states that the data must move both automatically and digitally. After all, that’s one of the reasons MTD was created.

The soft landing period ended in April 2021, and there are no signs that HMRC is going to allow a second soft landing period for businesses switching to MTD for VAT now.

Therefore, businesses starting using MTD for VAT now need to know the digital linking rules from day one.

Has Making Tax Digital for VAT been postponed?

MTD for VAT has not been postponed.

The final milestone deadline was the extension of MTD for VAT to all VAT-registered businesses, which began in April 2022.

Now, MTD for VAT applies to all VAT-registered businesses.

MTD for Income Tax has been postponed several times.

It was originally intended to be the first wave of Making Tax Digital back in 2018.

However, following feedback from consultations, government plans were radically altered such that MTD for VAT was the first roll out of Making Tax Digital in April 2019.

It was subsequently announced that MTD for Income Tax would begin in April 2023, but this was then postponed to April 2024.

What happens if I don’t sign up for Making Tax Digital?

If you don’t sign up for MTD for VAT, you’ll no longer have a way to submit a VAT Return.

This will mean you’ll miss your VAT filing deadline and will be subject to the new penalty system that begins in January 2023.

The new penalty system is built around points, and missing a deadline incurs one point. A points threshold is applied, based on how frequently you file returns.

Once you pass the points threshold a £200 penalty is automatically applied.

It’s worth noting that some people can apply to HMRC to be digitally excluded. This means they won’t have to deal with Making Tax Digital.

However, this exclusion is only for exceptional circumstances, and you can’t just opt into it.

You need a very good reason, such as the fact that the remoteness of your location means you can’t access the internet, or your religious beliefs prohibit you from using a computer.

Final thoughts on MTD deadlines

Making Tax Digital has arguably had a difficult gestation, as the revised deadlines demonstrate.

But it’s transforming the way VAT-registered businesses handle their accounting for the better.

MTD provides far better insight into your accounting, and therefore you can take control of vital business finance issues such as cash flow and forecasting with ease.

Editor’s note: This article was first published in February 2022 and has been updated for relevance.

Making Tax Digital for VAT checklist

Download your free (and easily printable) Making Tax Digital checklist and follow the steps to help you with your VAT Return processes.

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