How to file your VAT return via HMRC Making Tax Digital

What is Making Tax Digital (MTD)?

Making Tax Digital (MTD) is HMRC's initiative to move all tax reporting to digital systems. Since April 2022, all VAT-registered businesses with a taxable turnover above £85,000 have been legally required to keep digital records and submit VAT returns through MTD-compatible software.

From April 2026, MTD for Income Tax Self Assessment (ITSA) is also being rolled out for sole traders and landlords.

What you need to do

1. **Keep digital records** of all your VAT transactions — purchases, sales, and adjustments
2. **Submit VAT returns** directly via MTD-compatible software (not HMRC's own portal)
3. **Store records digitally** for at least 6 years

How Finovo handles MTD automatically

When you connect your bank accounts and create invoices in Finovo, all the data needed for your VAT return is captured automatically. When your filing deadline approaches:

1. Open **Taxes → VAT Return** in the sidebar
2. Review the calculated figures — Finovo shows a full breakdown by tax rate
3. Click **Submit to HMRC** — Finovo sends the return directly via the MTD API

No spreadsheets. No bridging software. No manual data entry.

VAT schemes supported

Finovo supports the three main UK VAT schemes:

• **Standard (accrual) accounting** — VAT is due when you invoice, not when you're paid
• **Cash accounting** — VAT is due when you receive or make payment
• **Flat Rate Scheme** — for eligible small businesses (turnover under £150,000)

Common MTD mistakes to avoid

• **Missing the deadline** — late submissions incur penalty points under the new penalty regime
• **Not reconciling before submitting** — always reconcile your bank first so figures match
• **Submitting from a bridging-only tool** — this doesn't count as keeping full digital records

Ready to file with Finovo?

Start a free 30-day trial and connect your bank account in under 5 minutes. Your first VAT return is pre-populated automatically.