Making Tax Digital (MTD)
What is Making Tax Digital? The UK tax authority HMRC's rule that VAT-registered businesses keep their records digitally and file VAT returns through compatible software.
In plain words
Making Tax Digital, or MTD, means a VAT-registered UK business keeps its VAT records in software and sends the VAT return to HMRC from that software, instead of typing figures into HMRC's website.
The return itself is a form of nine boxes.
A worked example
| Box | What it holds | Amount |
|---|---|---|
| 1 | VAT due on sales (£21,000 at 20%) | £4,200 |
| 4 | VAT reclaimed on purchases (£6,500 at 20%) | £1,300 |
| 5 | Net VAT to pay HMRC (box 3, £4,200, less box 4) | £2,900 |
| 6 | Total sales, excluding VAT | £21,000 |
| 7 | Total purchases, excluding VAT | £6,500 |
Boxes 2, 8 and 9 deal with goods moving between Northern Ireland and the EU, and are normally zero for a trader in Great Britain only. These are sample numbers for one quarter. Your adviser confirms rates and boxes.
Why it matters
- Cost. Late or wrong returns can bring penalties and interest.
- Deadline. A return is usually due one month and seven days after the VAT period ends. Check the dates shown in your HMRC account.
- Risk. A wrong figure in a box still adds up, so it can go unnoticed until HMRC asks.
How Kinnow handles it
The UK edition is from early 2027, and basic support is in place.
- Digital records. Kinnow keeps VAT on each invoice and bill at 0, 5 or 20 per cent.
- The return. For a VAT period, Kinnow builds the nine-box return from your sales and purchase records and gives you the file to download.
- A person files. Kinnow does not send the return to HMRC itself. You or your adviser file it through HMRC-recognised software or the HMRC portal.
The honest limit. Sending returns straight to HMRC needs HMRC's recognition of the software, which is an application process. We have not had every box checked by a UK adviser, so have yours confirm the first returns.
Setting up in the UK? Tell us your VAT scheme and period and we will show the return on your data.
In Kinnow
Related terms
- GST: India's version of a tax on sales.
- GSTR-3B: the Indian summary return, for comparison.
- Input tax credit: VAT reclaim is the same idea.
Questions
Does my business need to follow Making Tax Digital?
Generally yes, if you are VAT-registered, and only a few exemptions apply. Check HMRC's current guidance for your case.
Can I still type my VAT return into HMRC's website?
For most VAT-registered businesses, no. Returns must go through compatible software. Ask your adviser if you think you are exempt.
Does Kinnow file my VAT return with HMRC?
No. It builds the nine-box return and gives you a file. You or your adviser submit it through HMRC-recognised software or the HMRC portal.
Request a demo and we will build a sample VAT return from your data.