MTD for VAT rules will apply to all VAT-registered clients from 1st April

On 1st April 2022, Making Tax Digital (MTD), the government’s initiative to implement a fully digital tax system within the UK, will reach a new milestone: all VAT-registered clients will be required to follow MTD for VAT rules. 

What are the rules?

MTD for VAT requires affected clients to keep digital records and file their VAT returns through MTD-compatible software like FreeAgent. Currently, only VAT-registered clients with a turnover above the VAT registration threshold of £85,000 a year are required to follow MTD for VAT rules.

What’s changing?

From 1st April 2022, all VAT-registered clients, regardless of turnover, will be required to follow MTD for VAT rules, and the option to file VAT returns through HMRC’s website will no longer be available. 

If any of your clients are among the estimated 1.1 million business owners who will be affected by this change, they will need to start using MTD-compatible software, like FreeAgent, to: 

  • store their business records digitally
  • send their VAT returns to HMRC

How can FreeAgent help?

FreeAgent is MTD-compatible and supports the filing of MTD VAT returns. 

If the change in rules on 1st April means you’ll need to start submitting MTD VAT returns on your clients’ behalf for the first time, you’ll need to get your practice and clients set up for MTD for VAT. 

If you’ve been using FreeAgent to submit MTD VAT returns for clients whose turnover is above the VAT registration threshold, you’ll need to request authority to file MTD VAT returns on behalf of your remaining VAT-registered clients from your agent services account and then sign those clients up to MTD with HMRC.

To make the transition to MTD as smooth as possible, you might want to consider segmenting your clients who will be affected by the extension of the MTD for VAT rules.  

With the new tax year on the horizon as well as the upcoming changes to MTD for VAT, you may find that you need to add new clients to your Practice Dashboard. Our Knowledge Base has full details of how to add a new client or transfer an existing FreeAgent account.

Learn more about how FreeAgent can help as HMRC continues its rollout of Making Tax Digital.