Making Tax Digital (MTD) is a new government initiative that will eventually affect Income Tax, VAT, and Corporation Tax—though as of April 2022, only Making Tax Digital for VAT is fully up and running.
The idea behind MTD is to simplify the way businesses declare and pay their taxes, and reduce mistakes introduced by human error when submitting tax information.
As a sole trader or landlord, you’ll need to know exactly what you need to do to sign up for Making Tax Digital.
Read on for our step-by-step guide 👇
Do I have to register for Making Tax Digital?
The only part of Making Tax Digital that you need to think about signing up for right now is MTD for VAT. You need to sign up for MTD for VAT by April 2022, if you’re registered for VAT (even if your income is under the VAT registration threshold and you signed up voluntarily).
What is the deadline for MTD?
The deadlines to sign up for Making Tax Digital are:
- 1st April 2022 for VAT
- 6th April 2026 for Income Tax (for those earning more than £50,000 from self-employment or property income)
- 6th April 2027 for Income Tax (for those earning more than £30,000 from self-employment or property income)
How do I sign up for Making Tax Digital?
If you haven’t yet signed up for Making Tax Digital for VAT, you can do so on the gov.uk website. It’s a fairly simple process that requires you to submit certain information about yourself and your business. Your accountant can also sign up for you, if you have one.
You don’t yet need to sign up for Making Tax Digital for Income Tax, but when you do, the process will probably be similar. HMRC will likely release more details on this closer to the time, so we’ll let you know when we know.
You can find out more about in our step-by-step guide to signing up for Making Tax Digital.
How do I sign up for Making Tax Digital for VAT?
Ready to sign up for Making Tax Digital for VAT? Here are the steps you need to follow.
1. Choose (and sign up for) an MTD-compatible software program
You need to be set up with some MTD-compliant accounting software before you can sign up for Making Tax Digital for VAT. Under MTD, you’ll only be able to submit your VAT returns using this software, which you’ll also use to keep records of any VAT you pay or collect—so it’s important to pick an application that you like, and that’s easy to use.
Can I still use spreadsheets for MTD?
You can continue to use spreadsheets to record your VAT accounts if you really want to. But if you choose this route, you’ll need to use ‘bridging software’ that connects the program you use with HMRC’s system.
Honestly, though: it’s going to be much easier to find a dedicated, compliant piece of software that you can use to keep your records and submit your VAT returns all in one place.
2. Gather the information you need before you start
When you’re ready to sign up for MTD for VAT, you’ll need to gather together all the information you’ll need for the registration process. HMRC will ask for details about you and your business, so to make things easier, make sure you have the following to hand:
- Your business email address
- Your Government Gateway ID and password
- Your VAT registration number and date
- Your latest VAT return
And, depending on what business structure you operate under, you’ll need the following information too:
Sole trader
- Your National Insurance number
LLC or registered society
- Your company registration number
- Your Unique Taxpayer Reference (UTR)
General partnership
- Your Unique Taxpayer Reference (UTR)
- The postcode where you’re registered for Self Assessment
LLP
- Your Unique Taxpayer Reference (UTR)
- The postcode where you’re registered for Self Assessment
- Your Company registration number
3. Follow the steps on the government portal to sign up
Once you’ve gathered all the relevant information, you’re ready to sign up for MTD—congrats! The actual signup process is relatively simple, and you can do it on the gov.uk website. If you don’t yet have a Government Gateway ID and password, you’ll be able to sign up for one before you start the process of registering for MTD.
Once you’re there, just click through the registration form, enter your details, and—hey presto—you’re ready to go.
4. Wait for your confirmation email before you send a VAT return
You should receive an email confirming your registration within three days of signing up for MTD. If you don’t see the email arrive, be sure to check your spam folder (yes, even emails from HMRC can get lost in there occasionally!).
HMRC advises that you shouldn’t submit a VAT return before you’ve received your confirmation email—so hold off for now.
Making Tax Digital: General FAQs
Find the answers to your most pressing questions about MTD below.
Who is exempt from Making Tax Digital?
You’re automatically exempt from Making Tax Digital for VAT if you or your business are subject to an insolvency procedure, or if you’re not VAT registered (and your annual turnover is below the VAT threshold).
You can also apply for an exemption from MTD for both VAT and Income Tax if it’s not ‘reasonable or practical’ for you to use computers, software, or the internet. This may be because of your age, where you live, a disability, or on religious grounds.
If this applies to you, you can apply for an exemption by calling or writing to HMRC—or asking your accountant to do so for you.
If you’ve already been given an exemption from MTD for VAT, you won’t need to apply for an exemption from MTD for Income Tax once it’s rolled out, as you’ll be automatically exempt.
Can my accountant register for Making Tax Digital for me?
Yes, you can ask your accountant to sign up for MTD for you, for both VAT and Income Tax once it’s rolled out. You’ll need to provide them with the information you would have provided HMRC yourself—e.g. Your NI number, VAT registration number, etc.
Note that when they do register to act on your behalf, they’ll still have to send you a unique link where you’ll have to log in using your Government Gateway to approve them submitting returns for you.
You’ll also still have to follow the new processes brought in by MTD, like keeping digital records. Your accountant will be able to submit your VAT return and your Self Assessment tax return for you using MTD-compatible software.
FAQs: Making Tax Digital for VAT
Got specific questions about MTD for VAT? Read on for the answers to some FAQs.
Are new VAT registrations automatically signed up for MTD?
Yes, if you register for VAT for the first time after 1st April 2022, you’ll automatically be signed up for MTD. If you’re already registered for VAT, you’ll have to register for MTD yourself.
How long does it take to set up Making Tax Digital for VAT?
Once you’ve signed up for MTD, you should receive an email confirmation from HMRC within three days.
Can I deregister for VAT to avoid signing up for Making Tax Digital?
If you’re registered for VAT, but your taxable income is below the VAT threshold, you can cancel your VAT registration, which means you won’t need to sign up for MTD.
However, you’ll still have to sign up for Making Tax Digital for Income Tax once it comes into play in 2026, assuming your income is more than £10,000 per year.
Need help preparing for Making Tax Digital?
Are you ready for Making Tax Digital? The first step you need to take is to set yourself up with some easy-to-use, MTD-compatible accounting software. Have you tried Coconut?
Coconut is a simple bookkeeping app for sole traders and landlords that helps you understand your money by tracking your income and expenses in real time. You can use it to photograph receipts on the go, so you never miss out on claiming a business expense. Our app also allows you to send and track professional, branded invoices to your clients so you can stop wasting time chasing payments and focus on growing your business.
If you work with an accountant, you can invite them to see your account activity in just a few taps, which will make both of your lives easier.
Coconut will be ready for Making Tax Digital for Income Tax once it comes into effect in 2026—why not get a head start and try it out with a free trial?
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