Chapter 6

Filing your VAT return through Making Tax Digital

Once you’ve registered for VAT, you’ll need to submit returns online regularly – and square up with HMRC. Here’s how.

A VAT document being scanned onto a computer screen

What is Making Tax Digital (MTD)?

MTD means you must submit your VAT returns using software that is recognised by HMRC, like Xero. This means that you can no longer submit your VAT returns manually.

The use of this software is mandatory for VAT periods starting on or after 1st April 2022, so it’s a good idea to ditch the spreadsheets, upgrade your software, or migrate your accounts before the end of your next VAT period.

Once they’re up and running, many business owners find it far easier and quicker to calculate and submit returns using online MTD software.

How do I register for Making Tax Digital?

You must have compatible software before you sign up.

To sign up you need:

  • your business email address
  • a Government Gateway user ID and password – if you do not have a user ID, you can create one when you use the service
  • your VAT registration number and latest VAT return

You may need additional details to sign up. Check here for more information.

When to sign up:

If you already pay VAT by direct debit, don't sign up too close to the date that your return is due, or you may pay twice. To avoid this, don't sign up less than:

  • 7 days before your return is due
  • 5 days after your return is due

If you don't pay by direct debit, sign up at least 3 days before your return is due.

Methods for submitting VAT

1. Accounting software

Businesses above the VAT threshold must submit VAT using Making Tax Digital-compliant software. From April 2022, all VAT registered businesses must use MTD software, regardless of turnover. Learn more about Making Tax Digital.

2. Spreadsheets and MTD bridging software

If you use spreadsheets for VAT, you can still connect to HMRC’s MTD system via Xero. You can use Xero as bridging software that lets you upload VAT amounts, then send MTD VAT standard rate returns to HMRC. Find out more on this gov.uk page.

VAT due dates

Your due dates will depend on when you registered for VAT and what accounting scheme you use. Most businesses are required to submit every three months. You can get the specific dates from HMRC, by looking it up in your VAT online account.

Paying VAT to HMRC

If you have a VAT bill, you generally get one month and seven days to pay. You can do this via internet banking, debit card, or credit card. But perhaps the easiest way is to set up a direct debit. This allows HMRC to withdraw the VAT you owe directly from your bank account on the due date. You can read more about paying VAT online in our guide.

If you miss your deadline, you may face penalties. Find out more about surcharges and penalties on this gov.uk page.

Getting a VAT refund

If you paid more VAT than you collected, HMRC will owe you a refund. They aim to pay within 10 days of you filing your return. Make sure they have your bank details.

Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.

VAT Guide For Business

Making a start with VAT? Want to know more about how MTD for VAT impacts you? This guide will help you get sorted.

Download the VAT Guide for Business

Get your VAT sorted. Fill out the form to receive this guide as a PDF.

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