MTD for VAT and MTD for Income Tax: how the two fit together

acrenvo.com/guides/mtd-for-vat-and-income-tax, last reviewed 1 November 2026

Grace is fictional, but her situation is common enough. She works for herself as a garden designer, her business has been registered for VAT for some years, and she also lets out the flat she lived in before she moved. She has sent her VAT Returns through software for a while now, and she has just learned that she will need Making Tax Digital (MTD) for Income Tax as well. She wants to know whether this is the same thing again under a new name, or a second set of rules sitting beside the first. This guide explains what MTD for VAT asks of you, how it differs from MTD for Income Tax, and where the two meet.

What MTD for VAT asks of you

MTD for VAT has been in place for some time, so if you are already registered for VAT you are probably following it. GOV.UK puts it like this: All VAT registered businesses should now be signed up for Making Tax Digital for VAT unless you’re exempt or have applied for exemption.

The rule itself is short. Making Tax Digital for VAT requires all VAT-registered businesses to keep records digitally and file their VAT Returns using software. The software has to do three jobs, and GOV.UK’s VAT Notice says that the software businesses use must be capable of:

• keeping and maintaining the records specified in the regulations
• preparing VAT Returns using the information maintained in those digital records
• communicating with HMRC digitally through our Application Programming Interface (API) platform

You do not have to do all of that in one piece of software, which matters if part of your record keeping lives in a spreadsheet. The guide to keeping records for both taxes explains how the pieces can be linked, and the guide to digital links and bridging software for VAT goes further into the links themselves. The return itself goes from the software too. Once you’ve submitted your return, you’ll receive confirmation through your software that it has been received. If you use the Flat Rate Scheme, the guide to the Flat Rate Scheme under MTD for VAT explains which records you can leave out.

VAT Returns and when they are due

The VAT Return is the one thing MTD for VAT asks you to send. In GOV.UK’s words, you usually need to send a VAT Return to HMRC every 3 months. This is known as your ‘accounting period’. If you’re registered for VAT, you must submit a VAT Return even if you have no VAT to pay or reclaim.

The deadline is set by the end of each of your own accounting periods, so it is not the same date for every business. The deadline for submitting your return online is usually one calendar month and 7 days after the end of an accounting period. This is also the deadline for paying HMRC. You need to allow time for the payment to reach HMRC’s account. GOV.UK adds a point about timing that is easy to miss.

If your software cannot reach HMRC close to a deadline, HMRC posts planned downtime and known problems with its VAT service on its page VAT online: service availability and issues. The guide to VAT Return deadlines covers how the date is worked out and when a Direct Debit is taken.

How this sits beside MTD for Income Tax

For Grace, the useful way to think about it is that she now has two reporting rhythms. Her VAT Returns follow her VAT accounting periods, while her Income Tax updates follow the tax year. MTD for Income Tax asks for a quarterly update for each business, built from the start of the tax year. For each business you have, every quarterly update will show your total income and expenses for the tax year so far, based on your digital records. This is so you can make any corrections to your records if you need to, which will then be included in your next update.

For the tax year that started on 6 April 2026, the standard quarterly update deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. The MTD deadlines for 2026 to 2027 set out every date in the first MTD year. Her VAT Return deadlines depend on her VAT accounting periods instead, so the two sets of dates may or may not line up.

A VAT payment is tied to each return, so it falls due on dates set by your own accounting periods. Income Tax is paid on the Self Assessment dates instead, which GOV.UK’s penalties and payments on account pages give as 31 January for the bill, with payments on account on 31 January and 31 July.

Where the two meet

Although the rules are separate, there are a few places where being registered for VAT changes something on the Income Tax side, or where one decision serves both.

Software

GOV.UK’s guidance on choosing MTD for Income Tax software speaks to VAT-registered readers directly. If your business is VAT registered, you will already be using software to keep digital records and submit your VAT Returns. You should either check if your VAT software will also be compatible with Making Tax Digital for Income Tax or that your chosen software can meet your VAT needs. The guide to using one product for both lists which of the products we compare say they handle both, and from which plan.

The income test for MTD for Income Tax

Whether you need MTD for Income Tax depends on your qualifying income, not on your VAT registration. Qualifying income is your total income from self-employment and property, before expenses (also known as turnover), based on the tax return you submitted in the previous tax year. For VAT-registered readers, GOV.UK adds one point under the heading ‘If you use the cash basis and are VAT registered’: You can choose to include or exclude VAT when you declare your business income. If you include it, then it will count towards your qualifying income.

Simpler categories and the VAT threshold

MTD for Income Tax lets you sort your records in less detail if an income source’s turnover is below the VAT threshold, which GOV.UK currently gives as £90,000. If your turnover is growing towards that figure, the guide to reaching the VAT threshold explains what changes for both taxes, and the guide to simpler MTD record keeping covers the Income Tax side in full. If your turnover is falling instead, the guide to cancelling your VAT registration explains when you can ask HMRC to cancel and how the final return is sent.

Penalties

Both taxes use penalty points for late returns, but they are counted separately. If you are also registered for VAT, your penalty points for Making Tax Digital for Income Tax are separate from your penalty points for VAT. The guide to VAT and Income Tax penalty points sets the two systems side by side, and the guide to late payment interest on VAT covers the interest on a late payment.

If you cannot use digital tools

Each tax has its own exemption, and you ask for each one separately. For VAT, GOV.UK says that you can apply if it’s not reasonable or practical for you to use computers, software or the internet to follow the rules for Making Tax Digital for VAT. This could be because:

• of your age, health condition, disability or where you live
• you object to using computers on religious grounds
• you do not have access to the internet

To apply, you must call or write to HMRC. You should continue to send your returns as you usually do, until you receive a letter with HMRC’s decision. The guide to applying for an exemption from MTD for VAT explains what HMRC asks for and what it does not accept on its own. GOV.UK also says that you’re exempt from Making Tax Digital for VAT, and do not need to apply if:

• you or your business are subject to an insolvency procedure
• you’ve cancelled your VAT registration but still need to send your final return

If HMRC has already agreed that you are exempt from MTD for VAT, there is a shorter route on the Income Tax side. If HMRC previously confirmed that you are exempt from sending VAT returns using Making Tax Digital compatible software because you are digitally excluded, contact Self Assessment general enquiries by phone or in writing with your National Insurance number, your VAT registration number, the reason you are digitally excluded and whether your circumstances have changed. If they have not changed, HMRC will confirm you are also exempt from Making Tax Digital for Income Tax; if they have changed, you will need to apply. If your VAT exemption is because you are going through an insolvency procedure and you are signed up to Making Tax Digital for Income Tax, you will not be exempt and should continue to use the service. The guide to MTD exemptions covers the Income Tax exemptions in full.

Questions about MTD for VAT and MTD for Income Tax