Making Tax Digital for VAT deadlines

Keir Thomas-Bryant

Keir is Sage's dedicated expert in the small business and accountant fields. With over two decades of experience as a journalist and small business owner, he cares passionately about the issues facing businesses worldwide.

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

It includes significantly more businesses compared to before.

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

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

In total, HMRC says around 700,000 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.

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.

  • May 2015: The chancellor announces “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.
  • April 2022: MTD for VAT is extended to all VAT-registered businesses. This includes those who have 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 slow rollout of MTD for VAT over several years indicates this may be likely.

Your timeline for preparing for MTD for VAT

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

First, you’ll need to sign up for MTD for VAT. No, this doesn’t happen automatically. Prior to signing up, you’ll need to have selected which MTD-compatible software you’re going to use, because HMRC won’t let you proceed otherwise.

Don’t forget that, once you’ve signed up for MTD for VAT, you’ll need to activate that feature in the software. Speak to the software vendor.

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, 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.

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 using MTD for VAT software for the first time then this is the first time you’ll be required to create a return. Usually this is very straightforward.

Final thoughts on MTD deadlines

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

But it’s already 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.

Find out how Sage 200 ERP can help you and your business, call your local Sage Partner, Paradise Computing, on 01604 655900 or request more information on our online contact form.

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