MTD for VAT – Digital Record Keeping Requirements Explained (2025 Update)
With Making Tax Digital (MTD) for VAT now mandatory for all VAT-registered businesses in the UK, understanding the digital record keeping requirements is essential for staying compliant in 2025 and beyond.
Whether you are a sole trader, limited company, or partnership, failure to meet HMRC’s digital standards can result in penalties. Here’s everything you need to know.
What Is MTD for VAT?
MTD for VAT is a government initiative that requires businesses to:
- Keep digital records of VAT transactions
- Submit VAT returns using compatible software
- Follow digital links throughout the VAT return preparation process
Since April 2022, all VAT-registered businesses (regardless of turnover) must comply with MTD.
Digital Record Keeping: What You Must Include
Under MTD rules, your records must be kept digitally and include the following:
1. Business Information
- Business name
- Business address
- VAT registration number
- Any VAT accounting schemes used
2. Supplies Made (Sales)
- Time and value of supply (tax point and net amount)
- VAT rate charged
- Total output VAT due
3. Supplies Received (Purchases)
- Time and value of supply (tax point and net amount)
- VAT rate incurred
- Total input VAT you intend to reclaim
Note: You don’t need to store digital copies of invoices, but you must capture the required details digitally.
Digital Links: The Golden Rule
To ensure accuracy and transparency, MTD requires the use of digital links between data and final VAT submissions. Manual copy-pasting is no longer acceptable.
Examples of compliant digital links:
- CSV file import/export between systems
- API connections between software
- Spreadsheets that are digitally linked to MTD-compatible software
What Is MTD-Compatible Software?
You must use software that can:
- Record and store VAT records digitally
- Submit VAT returns directly to HMRC via their MTD API
Popular MTD-compliant software includes:
- Xero
- QuickBooks
- Sage
- FreeAgent
HMRC maintains a full list of approved providers.
Penalties for Non-Compliance (2025)
HMRC is tightening enforcement in 2025, including:
- Late submission penalties under the new points-based system
- Late payment interest from the date the VAT is due
- Potential fines for not using compatible software or not maintaining proper records
How Eclat Accountancy Can Help
At Eclat Accountancy, we help businesses:
- Transition to MTD-compliant systems smoothly
- Ensure your VAT records meet digital requirements
- Avoid penalties by keeping you fully compliant
- Provide ongoing training and support
Final Thoughts
Keeping digital VAT records isn’t just a formality—it’s a legal requirement under MTD. With HMRC tightening the rules in 2025, it’s more important than ever to review your digital systems and processes.
Need help with MTD for VAT? Contact Eclat Accountancy today for expert guidance.
