Making Tax Digital for VAT: What you Need to Know- Updated 2024

Making Tax Digital and how it can help you.

The Making Tax Digital initiative’s  compliance date was the  1st April 2019 and was made mandatory for all VAT-registered businesses in April 2022. Don’t be caught out and risk fines when we can give you a clear roadmap on how to be prepared and  compliant. Get a good financial foundation by having all your information in order and at your fingertips. It will have you ready for the change and also give you a solid planning strategy to plot your company’s growth.

In a bid to keep timely online records accessible at all times, HMRC  launched the Making Tax Digital (MTD) initiative. It requires all VAT-registered businesses above the £85k threshold to submit returns online, using compatible accounts software such as Xero. There are limited exceptions, and those who do fall into the exceptions group will still need to start filing online VAT returns come2026. If you are not yet legally required, to do so, you can still choose to opt in. If you’re VAT registered, then you need to know the ins and out of this process.

Why is MTD happening?

HMRC have brought in the initiative in a bid to be more effective, more efficient and make the process easier for taxpayers. This fully digital tax system may seem like just another change, but once adaptations to the new system are made, tax returns will be less painful to process for both parties. There will be no change in deadlines or return dates, regardless of the scheme you are on.

During the rollout in 2019, only businesses with a taxable turnover over £85,000 were required to comply, however since April 2022, all VAT-registered businesses must file digitally through MTD, regardless of taxable turnover. It is expected that the MTD for Income Tax Assessment will be introduced on April 6, 2024. This will impact idviduals with a personal income above £10,000 across their business and properties. If you have an income of £10,000 or less, you can continue using the existing Self-Assessment system.

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This is the future of tax as a whole; plans are underway to bring in MTD for Income Tax  sometime in the near future.

What do I need to do?

All VAT returns will need to be submitted through HMRC‘s new dedicated MTD system that will communicate directly with your accounting software. You will need to upload all transactions through accounts software that is “functional compatible software”. If all transactions are correctly recorded electronically there is no requirement to maintain digital copies of the source documents, although this may be your preference.
To read all the requirements in full please visit the VAT Notice 700/22: Making Tax Digital for VAT page on

Do I need to use MTD for corporation tax?

The compliance date for using MTD for income tax is quickly approaching, however businesses are not required to report under MTD for corporation tax until at least 2026.

In saying this, it is expected that HMRC will aim to launch a pilot scheme for companies from April 2024 encouraging businesses to start filing with MTD for corporation tax.

Who doesn’t need to use MTD?

If your business is not VAT registered, you do not need to follow MTD rules. However, if your turnover exceeds the VAT threshold, you will need to register for VAT and comply with MTD.

You can check if you can apply from an exemption from MTD for VAT via the website.

Removing the unnecessary stress

If you’re already using Xero to submit your VAT returns you can breathe a sigh of relief right now. An update will be rolled out automatically ensuring an easy path to online submission. There’s no additional cost. As it will become a legal requirement Xero sees it as a mandatory part of the basic package. If you’re not already using Xero, then making the move could save you a lot of headache. If you’re thinking about making the move, then we would be happy to help you get your business accounts up and running in Xero.

Making Tax Digital makes it all easier

Xero and Making Tax Digital

It’s no secret we specialise in Xero but it’s also the smart play. The Xero team consulted with HMRC on their MTD initiative, and as such ensured the software would be fully compliant, both now and moving forward. They’ve always been committed to supporting small businesses and have been placed on the HMRC list of Software Suppliers Supporting MTD.

Happy to help

If you’re thinking of making the move to Xero or want some reassurance on how to correctly submit your returns through Xero, we will be happy to talk you through it – Get in touch.

Why choose Unicorn Accounting?

Ensure you keep on top of your finances and tax obligations by outsourcing to an accountant. This means that you don’t need to worry about your end of year accounts, payroll, or bookkeeping requirements.

At Unicorn Accounting we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year roundget in touch with Unicorn Accounting today. Or click here to get a free quote.

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Breakout E-commerce accountants and Xero specialists to supercharge your UK online business growth.