VAT Registration vs Making Tax Digital for VAT

VAT registration and Making Tax Digital for VAT are separate but linked obligations. Registering for VAT triggers the MTD for VAT rules — understanding both helps businesses avoid penalties and choose the right software.

Tip: scroll the table sideways to see all columns →

FeatureVAT RegistrationMaking Tax Digital for VAT
Threshold triggerMandatory registration when taxable turnover exceeds £90,000 in any rolling 12-month period (from April 2024); voluntary registration is permitted below this thresholdMandatory for all VAT-registered businesses from April 2022 (over threshold) and April 2022 for all registered businesses; no separate turnover threshold — registration triggers MTD
Scheme choiceStandard VAT, Flat Rate Scheme (FRS), Cash Accounting Scheme, Annual Accounting Scheme — choice affects how VAT is calculated and paidNo separate scheme choice for MTD — it is a record-keeping and filing method, not a VAT scheme; compatible with all VAT accounting schemes
Registration deadlineMust register within 30 days of end of the month in which you exceeded the threshold; late registration incurs a penalty based on VAT owedCompliance required from the first VAT period starting on or after the date you became obligated; no separate registration — follows VAT registration
Software requirementsNo software required for VAT registration itself — registration done via HMRC online services (VAT1 form)Mandatory use of HMRC-recognised MTD-compatible software (e.g. Xero, QuickBooks, Sage, FreeAgent) to keep digital VAT records and submit returns via the API
DeregistrationCan deregister voluntarily if taxable turnover falls below £88,000 or ceases; must deregister if business stops making taxable suppliesMTD obligations cease on deregistration from VAT; no separate MTD deregistration process
Penalty regimeLate registration penalty of 5%–15% of VAT owed since the date you should have registered (higher rates for longer delays)Points-based penalty system from January 2023: 2 points = first financial penalty; penalties escalate for repeat failures; separate regime from VAT penalty regime
Late-filing penalty pointsLate payment penalties apply to VAT owed: 2% after 15 days, 4% after 30 days, plus daily penalties thereafterMTD filing points accrue separately: 4 points for quarterly filers triggers £200 penalty; submit all returns and wait 24 months for points to expire
Digital link requirementNot applicable — VAT registration is a status, not a data-processing obligationDigital links must connect all parts of the VAT calculation chain — copy-and-paste between spreadsheets does not qualify; bridging software or integrated accounting software required
Sole trader vs limited company differencesBoth sole traders and limited companies register in the same way; sole traders use their NI number and UTR; limited companies use their company registration numberSame MTD rules apply to sole traders and limited companies registered for VAT; the business entity type does not change the MTD obligations
Recent changesRegistration threshold raised from £85,000 to £90,000 in April 2024; deregistration threshold raised to £88,000; no change to VAT rates for most businessesMTD for VAT extended to all VAT-registered businesses in April 2022; MTD for Income Tax Self Assessment (ITSA) deferred — sole traders and landlords above £50,000 from April 2026

MTD for VAT applies to all VAT-registered businesses, including those registered voluntarily below the £90,000 threshold. HMRC has published a list of approved MTD-compatible software on GOV.UK. Bridging software is an option for businesses that want to keep existing spreadsheets but must digitally submit.

Related guides

VAT Registration and Thresholds

Value Added Tax (VAT) is a tax on the supply of most goods and services in the UK. Once your taxable turnover exceeds the registration threshold, registration is compulsory — but you can also register voluntarily before reaching it.

5 min

VAT Schemes for Small Businesses

HMRC offers several VAT accounting schemes that can simplify record-keeping and improve cash flow for smaller businesses. Each scheme has eligibility thresholds, advantages, and limitations. Choosing the right scheme can save time and, in some cases, money.

8 min

Making Tax Digital

Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system by requiring businesses and individuals to keep digital records and submit tax information using compatible software. MTD for VAT is already mandatory for all VAT-registered businesses. MTD for Income Tax Self Assessment is being phased in from April 2026.

8 min

Sole Trader vs Limited Company

Choosing the right business structure is one of the most important decisions you will make as a new business owner. Sole trader and limited company are the two most common options, each with distinct implications for tax, personal liability, and administrative burden.

8 min

Business Record Keeping

Keeping good business records is both a legal requirement and essential for running your business effectively. HMRC can inspect your records for up to six years — and poor records can result in tax investigations, penalties, and unnecessary stress.

5 min

Companies House Filing Requirements

Every private limited company in the UK must make certain filings at Companies House. Missing deadlines can result in automatic financial penalties and, eventually, your company being struck off the register. This guide covers the key obligations.

6 min

Disclaimer

The information on this page was correct at the time of writing. Amounts, thresholds, and rules may change. Always check the latest official guidance.