What is Making Tax Digital?
As of April 2019, VAT-registered businesses with a turnover of more than £85,000 are required to use the Making Tax Digital (MTD) service to keep records digitally and use accounting software to submit their VAT Returns. This will enable businesses to be MTD compliant with the HMRC.
Do you have to be MTD compliant?
Not all companies fall under the scope of MTD. You are exempt if your company is already free from filing a VAT Return online.
You can also be partly exempt. For instance, you can't reclaim VAT you pay on goods and services that aren't for business purposes, but if you buy them for both business and personal use, then you will be able to use the partial exemption method.
Read more: Does my business have to be MTD compliant?
Will there be a penalty if you don’t comply?
The new penalty system for Making Tax Digital will apply to submissions made after 1 January 2023. The changes will initially only apply to you if you need to submit VAT Returns with a regular frequency, for example quarterly or annually.
The system will be points based. If you submit your tax return late, you get a point. At a certain amount of points, you will need to pay a penalty of £200.
| Submission frequency | Penalty threshold |
| Annual | 2 points |
| Quarterly | 4 points |
| Monthly | 5 points |
How to register for MTD
Your business won’t automatically be registered for MTD, so you will need to register on the HMRC website. Be aware that it will take HMRC up to 72 hours to process your application and respond to you, and you won’t be able to submit your VAT Return before the sign up is completed. Don’t leave it until the last minute!
Read more: How to register for Making Tax Digital
How to submit your VAT Return
Submitting your VAT Return in compliance with MTD is really easy when you use an accounting software like Bokio. Once you do your accounting for the period, your VAT Return is automatically calculated, so you can submit it to HMRC in just a few clicks.
Watch the video for a step-by-step guide to registering for Making Tax Digital and submitting your VAT Return.
Find out when your VAT Return is due here
What is the timeline for Making Tax Digital for VAT?
- October 2018: Open to sole traders and companies.
- Early 2019: Testing open to partnerships and those customers that trade with the EU
- Spring 2019: Pilot open for MTD customers that have been deferred
- April 2019: MTD mandated for all customers (except those that have been deferred)
- October 2019: MTD mandated for businesses that have been deferred
- April 2021: Soft landing period ends
- April 2022: MTD mandatory for all VAT registered businesses
Is Bokio accounting software HMRC compliant?
Yes, Bokio is a MTD software and will help you all the way through to submit your VAT Return and record your transactions digitally. Thus you will find us in this HMRC list of MTD compliant softwares.
How is Bokio different from any other Making Tax Digital software?
MTD software that’s easy to use
Bokio accounting software is MTD compatible. We help you all the way, from recording a transaction to submitting your VAT Return to HMRC.
Here’s how it works:
- Snap a picture of a receipt and upload it in Bokio, or connect your bank feed to import transactions. Then use our smart bookkeeping templates to record them in your accounting.
- Create a professional branded invoice with Bokio's invoice template and send it to your customers.
- Manage expenses made by you and your employees, without the hassle.
- Submit your automated VAT Returns to HMRC in just a few clicks. You are fully MTD compliant.
- Invite your accountant to collaborate, or find one through Bokio if you need some extra support.
This article was updated August 2023
