Businesses should take steps to prepare for Making Tax Digital (MTD) for VAT before it becomes mandatory for all VAT-registered businesses, HMRC has said.

Designed to help businesses eliminate common errors and save time managing their tax affairs, MTD for VAT will become mandatory for smaller VAT businesses from 1 April 2022.

MTD for VAT has been mandatory for VAT-registered businesses with taxable turnover of £85,000 or above since 1 April 2019.

In July 2020, it was announced all VAT-registered businesses would have to file VAT digitally from April 2022, regardless of their turnover.

HMRC is therefore urging businesses to explore digital record-keeping for VAT and choose the right MTD-compatible software to support their needs.

Joanna Rowland, HMRC's director-general for transformation, said:

"MTD is fundamental to the delivery of a trusted and modern tax system, making it easier for businesses to get their tax right and supporting the UK to go digital.

"By signing up for MTD, we expect most businesses to experience long-term benefits, including reduced errors and time saved in managing their tax affairs."

Mike Cherry, chairman of the Federation of Small Businesses, agreed:

"It's important that firms do all they can to get ahead of deadlines and access the affordable platforms that are now available."

Talk to us about how to prepare for MTD for VAT.

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