Up to £900m in VAT compliance costs saved in MTD digital filings
On 27 February 2025, the UK’s HMRC published an estimate of the cost savings and wider benefits from its rollout of digital VAT filing initiative, Making Tax Digital for VAT. VATCalc’s VAT Filer is recognised by HMRC for UK VAT returns submissions and digital record keeping.
Making Tax Digital is a key part of HMRC’s transformation of the tax system to make it easier for taxpayers to get their tax right first time, help reduce scope for error and enhance customer experience. Since April 2022 all VAT businesses should be using MTD compatible software to keep digital records and submit returns.
HMRC believes a time saving of between 32 million hours and 49 million hours in the 2022 to 2023 tax year across all businesses in Making Tax Digital for VAT using fully functional software. The financial value of this time is estimated to be between £603 million and £915 million. This is based on a survey of 2,300 VAT payers.
MTD for VAT is the UK’s first stage of digitising tax reporting and will be rolled out to other taxes in the next few years, including Income Tax is set to be mandated in 2026 or 2027 depending on the taxpayer’s threshold.
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MTD for VAT roll out
HMRC rolled out its MTD for VAT programme in three stages:
- April 2019 – mandated VAT registered business to file their regular return via the new API portal
- April 2021 – digital bookkeeping and digital links requirements introduced. At the same time, MTD for VAT requirements became subject to regular VAT penalty regime. This measure was originally scheduled for April 2020, but was delayed due to the COVID-19 pandemic.
- April 2022 – all voluntarily VAT registered business below the VAT registration threshold of £85,000 must also comply with the above requirements.
Some VAT-registered businesses may be eligible for an exemption from Making Tax Digital, if it is not reasonable or practicable for them to use digital tools for their tax. If a business has previously been granted an exemption for VAT online filing, this will carry over to Making Tax Digital VAT requirements.
