To submit a Making Tax Digital VAT return to HMRC, you need MTD-compatible software that connects directly to HMRC’s systems. You log your VAT records digitally, run the figures through your software, and submit the return via an API link to HMRC rather than through the old online VAT account. Most accounting practices handle this on behalf of their clients using HMRC-approved software such as BrightTax by Bright.
What is Making Tax Digital for VAT, and who does it apply to?
Making Tax Digital (MTD) for VAT is HMRC’s requirement that VAT-registered businesses keep digital records and submit VAT returns using MTD-compatible software. It is no longer optional.
MTD for VAT became mandatory for all VAT-registered businesses from November 2022, regardless of turnover. This includes businesses that were previously below the £85,000 registration threshold and had deferred signing up.
If your client is VAT-registered and has not yet signed up to MTD for VAT, they are non-compliant and at risk of penalties.
MTD for Income Tax Self Assessment (MTD ITSA) is being phased in from April 2026, with separate requirements around quarterly updates and end-of-period statements. If you have clients who are self-employed or receive property income, it is worth getting across the requirements now. Find out more about MTD for ITSA.
What software do you need to submit an MTD VAT return to HMRC?
You need software that is listed on HMRC’s approved MTD software page. The software must be able to:
- Keep digital VAT records
- Calculate the nine-box VAT return figures
- Connect directly to HMRC’s API and submit the return
Accounting practices typically use dedicated tax and accounts software rather than asking clients to manage this themselves. BrightTax by Bright is HMRC-recognised software that handles MTD for VAT submissions as part of its wider suite of cloud-based compliance tools.
What are the steps to submit an MTD VAT return to HMRC?
The process follows a consistent sequence once the business is signed up for MTD for VAT.
Step 1: Sign up for MTD for VAT
The business (or the agent acting on their behalf) must sign up through the HMRC MTD sign-up service. Agents need to be linked to the client through HMRC’s agent services account before they can submit on their behalf.
Step 2: Keep digital VAT records
All VAT transactions must be recorded digitally from the start of the MTD obligation period. Records must include the time of supply, the value, and the VAT rate. Digital links must be maintained between source data and the return figures.
Step 3: Prepare the nine-box VAT return
Your MTD software calculates the return from the digital records. The nine boxes cover output tax, input tax, total value of sales and purchases, and the net VAT payable or reclaimable.
Step 4: Submit through your MTD-compatible software
Once the figures are checked and approved, you submit directly through your software’s connection to HMRC’s API. This replaces the old HMRC online portal submission entirely.
Step 5: Confirm submission and retain records
HMRC will confirm receipt. Digital VAT records must be kept for six years.
What are the digital linking rules for MTD VAT?
Digital linking is one of the areas where practices most often get caught out. HMRC requires that every step in the journey from source data to submitted return uses a digital link, meaning no manual re-keying at any point.
Acceptable digital links include formula-driven spreadsheet connections, automated data imports, and API transfers between software products.
Copy-and-paste between systems is not an acceptable digital link. If a client is currently copying figures from a spreadsheet into a separate submission tool, that process needs to be corrected.
What are the penalties for getting MTD VAT wrong?
HMRC applies a points-based penalty system for late MTD VAT returns, introduced in January 2023. Under this system:
- Each late submission adds a penalty point
- A financial penalty applies once a threshold is reached (two points for annual filers, four points for quarterly filers)
- A separate late payment interest charge applies from the day after the payment deadline
There are also penalties for failing to keep digital records or for submitting through a non-compatible method. These are not automatically triggered but can arise from an HMRC compliance check.
How does BrightTax by Bright handle MTD VAT submissions?
BrightTax by Bright is a cloud-based suite of tax and accounting solutions designed for accounting practices managing compliance on behalf of clients. For MTD VAT, BrightTax connects directly to HMRC’s API, meaning returns are submitted from within the software without any need to log into a separate HMRC portal.
The workflow is built around the practice rather than the individual business, which matters when you are managing VAT submissions for dozens or hundreds of clients at once. Digital record integration, nine-box calculation, and submission confirmation are all handled within a single environment.
For practices already using BrightManager by Bright for workflow and task management, BrightTax comes from the same vendor, which means support, onboarding, and product development all sit in one place rather than across multiple suppliers.
What are the common MTD VAT mistakes that accounting practices see?
The issues that come up most regularly when practices review client MTD compliance include:
- Clients who signed up for MTD but are still submitting through the old HMRC online portal (this is non-compliant)
- Broken digital links where data is manually transferred at one or more points in the chain
- Agents who are not formally linked through HMRC’s agent services account and therefore cannot submit on the client’s behalf
- Businesses using bridging software as a permanent solution without understanding the digital linking requirements
- Missing or incomplete VAT records for the obligation period
- Catching these before an HMRC compliance check is significantly less disruptive than addressing them after one.
How does BrightTax compare to other MTD VAT software for accountants?
Practices choosing MTD VAT software typically weigh up a small number of options. The key differences between the main products are around whether the software is built for individual businesses or for practices managing multiple clients, whether it integrates with the rest of the practice’s workflow, and how it handles the agent authorisation process with HMRC.
BrightTax by Bright is built specifically for accounting practices rather than end-user businesses. For practices already using BrightManager by Bright, BrightPay by Bright, or BrightAccountsProduction by Bright, it comes from the same vendor, which reduces the number of supplier relationships a practice needs to manage and means support, onboarding, and product development sit in one place.
Practices coming from standalone MTD bridging software or desktop tax products will find that moving to a cloud-based solution like BrightTax reduces the friction of multi-client submission management considerably.
Frequently asked questions about MTD VAT returns
Can I still use spreadsheets for MTD VAT?
Yes, but only if the spreadsheet is digitally linked to HMRC-approved bridging software that submits the return. The spreadsheet itself cannot be used to submit directly. Copy-and-paste between the spreadsheet and submission software is not a valid digital link.
Do I need to sign my client up for MTD VAT, or do they do it themselves?
Either is possible. As an agent, you can sign clients up through your HMRC agent services account. You will need a 64-8 or digital authorisation in place first. Once signed up, you can manage and submit returns on their behalf.
What is bridging software for MTD VAT?
Bridging software is a category of MTD-compatible tools that sit between a business’s existing records (often a spreadsheet) and HMRC’s API. It pulls figures in and submits them digitally. It is a compliant method for some businesses but requires careful management of digital linking rules to remain so.
How long do digital VAT records need to be kept?
Six years from the end of the VAT period they relate to. This applies to digital records used to prepare MTD VAT returns, not just the returns themselves.
What happens if a client misses an MTD VAT deadline?
Under HMRC’s points-based system, a penalty point is added for each late submission. A financial penalty is triggered once the threshold is reached: £200 for the first financial penalty, and £200 for each subsequent one whilst the threshold is still met. Interest accrues separately on late payments.
If you are looking for MTD-compatible software built for accounting practices, find out more about BrightTax by Bright and what it covers for VAT compliance.
Written by Rachel Quinn | Rachel has worked in accounting software since 2014 and has been part of the Bright team since its inception. She writes from first-hand experience of how UK accounting practices use Bright’s products to manage compliance, reduce admin, and grow their practices.
