The Complete Guide to MTD for VAT: Software, Bridging, and Filing
Making Tax Digital for VAT (MTD for VAT) is now the default way you file your VAT return with HMRC — no exemptions based on size, turnover, or how long you've been in business. This complete guide to MTD VAT software covers everything from what the government requires, to choosing the right platform, to the digital-link rules that catch people off guard.
If you're already compliant, you'll find ways to optimise your process. If you're still getting to grips with it, we'll walk through the whole thing from the ground up.
What is MTD for VAT? (And why it matters)
Making Tax Digital for VAT is HMRC's push to bring VAT filing into the digital age. Instead of filing on the government portal and typing in nine numbers manually, you now file through software that talks directly to HMRC's systems.
There are two core obligations:
- Keep your records digitally. Not on paper, not in a basic spreadsheet unless that spreadsheet is digitally linked to your filing software (more on "digital links" in a moment).
- File your return through MTD-compatible software. The old HMRC portal method is no longer allowed.
If you've been putting this off, HMRC's enforcement is tightening, and the penalties for non-compliance are real. Now is the time to get sorted.
Digital records and digital filing: the non-negotiables
Your VAT records must include your business name, address, VAT registration number, the VAT scheme you use, the date, value, and VAT rate on each sale, the date, value, and input tax claimed on each purchase, and a summary of output tax versus input tax for the period.
All of this must live in software. A spreadsheet doesn't count unless it's electronically linked to your filing software (this is where most people trip up — more in a moment).
When it comes to filing, you submit your VAT return to HMRC via an API — an automated data connection built into your software. You don't log into the HMRC website and type anything in. The software calculates your nine-box figures from your digital records and sends them directly to HMRC.
Modern accounting software does this transparently. You review the figures, click submit, and the system handles the rest. If you've already moved from spreadsheets to proper accounting software, you're ahead of the game.
The nine-box VAT return: a quick reference
Your VAT return consists of nine boxes:
| Box | What it is |
|---|---|
| 1 | VAT due on sales and other outputs |
| 2 | VAT due on acquisitions from other EU countries (mainly used for Northern Ireland post-Brexit) |
| 3 | Total VAT due (Box 1 + Box 2) |
| 4 | VAT reclaimed on purchases and other inputs |
| 5 | Net VAT to pay or reclaim (Box 3 - Box 4) |
| 6 | Total value of sales and other outputs (excluding VAT) |
| 7 | Total value of purchases and other inputs (excluding VAT) |
| 8 | Total value of supplies to EU countries (mainly Northern Ireland) |
| 9 | Total value of acquisitions from EU countries (mainly Northern Ireland) |
Your software must calculate these from your digital records and submit them via the MTD API. You'll see them before filing so you can check for errors.
Demystifying "digital links"
This is where most confusion lives. And honestly, the rule is almost deliberately obscure.
A digital link is an electronic transfer of data between software systems. In plain English: data moves from one system to another without you manually re-keying it.
Examples that count as digital links include importing a CSV file from one software into another, an API connection between two products, a linked cell or formula in a spreadsheet that pulls data from another spreadsheet, or a direct database connection.
What does NOT count: manually typing figures (if you look at a spreadsheet and type those numbers into your filing software, that is not a digital link and it's non-compliant), reading from a paper printout and entering it manually, or relying on copy-paste as your data transfer method (this is a grey area, but HMRC prefers you don't).
If your VAT data travels through more than one system — a spreadsheet for your records and separate filing software for the return — every handoff must be digital. Break the chain once with manual re-entry, and you've technically breached the rules. This is where the digital-link rule bites.
The simplest path: use one software product that handles everything — records, calculations, and filing in one place. No digital links needed because there's nothing to link. If you do use spreadsheets, they must be electronically connected to your filing software, either through direct integration or automated export/import (no manual steps in between).
Choosing MTD-compatible software
Not all accounting software is MTD-compatible, and not all MTD-compatible software is equally good.
HMRC API integration is non-negotiable — the software must submit VAT returns directly to HMRC through the MTD API. Digital record-keeping means the software maintains your records in the correct format, not just generates the nine-box summary. Bank feeds save time and cut errors. VAT scheme support matters — does it handle standard rate (20%), reduced (5%), zero-rated, exempt supplies, flat rate, cash accounting, or reverse charge? Error checking flags unusual figures before you file. Multi-rate handling tracks standard, reduced, zero, and exempt supplies separately. Reporting lets you review figures before submission and compare with prior periods.
Platforms like Relentify are built with MTD compliance baked in from the start — the record-keeping, the calculation, the filing, all in one workflow.
Full accounting software handles everything: invoicing, expenses, bank reconciliation, reporting, and VAT filing. If you're building a proper accounting setup, this is the most efficient approach.
VAT filing-only software only submits the return to HMRC. You maintain records elsewhere and enter or import the nine-box figures. This meets the minimum requirement but misses the broader benefits of integrated accounting.
Bridging software connects spreadsheets to the MTD API. If you're determined to stick with spreadsheets, bridging software can submit the figures digitally. But you must ensure your spreadsheet is electronically linked to the bridging tool — otherwise you've broken the digital-link chain.
Filing, deadlines, and common mistakes
To file your VAT return: reconcile your bank accounts, ensure all invoices and expenses are recorded, review the nine-box summary for unusual figures, submit through your software, and arrange payment if you owe VAT (Box 5 is positive). Payment is due one month and seven days after the VAT period end.
Late submissions earn points under HMRC's penalties system. At 4 points (for quarterly filers), you receive a penalty. Late payment incurs a percentage penalty on the outstanding amount, plus interest from the day after the deadline.
Common mistakes: filing through the HMRC portal (no longer compliant), breaking the digital-link chain with manual re-entry, not reconciling before filing, filing for the wrong period, and forgetting partial exemption rules if you make both taxable and exempt supplies.
If you're unsure about your VAT scheme, check the VAT registration guide or talk to your accountant. For more detail on financial reporting and managing your records, we've covered those separately.
Frequently Asked Questions
Q: Can I still file my VAT return through the HMRC website? A: No. The old HMRC portal method no longer satisfies MTD requirements. You must use MTD-compatible software that submits directly to HMRC via the API.
Q: What if I'm still using spreadsheets? A: You can continue using spreadsheets if they are electronically linked to MTD filing software (not manually re-keyed). However, the simpler approach is to move to accounting software that handles both records and filing in one system.
Q: Is there a penalty if I file late? A: Yes. HMRC uses a points system. One late submission equals one point. At 4 points (for quarterly filers), you receive a penalty. You'll also pay interest on any late payment.
Q: What is a "digital link" and do I need one? A: A digital link is an electronic transfer of data between systems — an API connection, an import/export with no manual steps, or a formula linking two spreadsheets. You need digital links if your data travels through multiple systems. The easiest solution is to use one software product for everything.
Q: What if my software doesn't support my VAT scheme? A: Check HMRC's list of recognised MTD software to confirm your software handles your scheme (flat rate, cash accounting, reverse charge, etc.). If it doesn't, you'll need to switch.
Q: Can I use multiple software products? A: You can, but every data transfer between them must be digital. This is where the digital-link rule bites. Using one integrated platform is simpler and less error-prone.
Q: Do I need to file electronically if my business is very small? A: Yes. There are no exemptions based on size or turnover. If you're VAT-registered, you must file through MTD software.
Q: How often do I file? A: Most UK businesses file quarterly (one return every three months). Some file annually if they're in a special scheme. HMRC will have assigned you periods — check your VAT registration letter.
Making Tax Digital for VAT was designed to reduce errors and make tax more straightforward. If you're still figuring it out, you're not alone — but the longer you delay, the further behind you get. The software landscape is mature now. Switching to MTD-compliant accounting is genuinely easier than staying with spreadsheets.
Ready to get compliant? Try Relentify free for 14 days. Our accounting suite handles records, filing, and everything in between — one platform, no Zapier, no digital-link headaches.