VAT and Making Tax
Digital: the
complete guide
You must register for VAT once your taxable turnover passes £90,000 in a rolling 12-month period, though voluntary registration below that can sometimes save money. Making Tax Digital for Income Tax is a separate, phased requirement for sole traders and landlords to keep digital records and file quarterly, starting at £50,000 qualifying income and lowering over time.
VAT and Making Tax Digital are two separate systems that trip up UK businesses in different ways: VAT because the registration threshold is a rolling calculation people miscalculate, and MTD because its phased rollout means your obligations can change without you doing anything differently. This guide covers both.
When you must register for VAT
VAT registration becomes mandatory once your taxable turnover exceeds £90,000 in any rolling 12-month period, not your accounting year, which is where most people miscalculate it. Our full threshold guide and original plain-English VAT registration guide cover exactly how to monitor this and what to do once you're close.
Registering before you have to
You don't have to wait for the threshold, voluntary registration can save money for some businesses, particularly those selling mainly to other VAT-registered businesses who can reclaim the VAT you charge them. See when voluntary registration actually pays off.
The flat rate scheme: simpler, not always cheaper
Once registered, you can choose between standard VAT accounting and the flat rate scheme, which simplifies your return at the cost of losing the ability to reclaim VAT on most purchases. It suits some businesses and genuinely costs others money, our flat rate scheme guide covers the "limited cost business" trap that catches most consultants.
Making Tax Digital for Income Tax
Separate from VAT entirely, MTD for Income Tax requires qualifying sole traders and landlords to keep digital records and file quarterly updates rather than one annual return. It's rolling out in phases by income threshold, already live above £50,000, with lower thresholds phasing in over the coming years. Our MTD ITSA guide covers exactly who's affected and when.
In this guide
Do I need to register for VAT? A plain-English guide
The original guide to mandatory and voluntary registration.
VAT registration threshold 2026/27
The rolling 12-month calculation, explained properly.
Should I register for VAT voluntarily?
When registering early actually saves money.
VAT flat rate scheme: is it worth it?
The limited cost business trap that catches most consultants.
Making Tax Digital for Income Tax
Who's affected now, who's next, and what to do before your phase.
Frequently asked questions
What is the VAT registration threshold?
£90,000 of taxable turnover in any rolling 12-month period, not a fixed annual calendar, which is the detail most businesses get wrong when monitoring it.
Is the VAT flat rate scheme always cheaper?
No, it suits businesses with low VAT-rated purchases relative to turnover, but the 16.5% limited cost business rate often makes it more expensive for consultants and service businesses with minimal goods spend.
Is Making Tax Digital the same as VAT?
No, Making Tax Digital for Income Tax is a separate system for sole traders and landlords, requiring digital records and quarterly updates, based on income thresholds rather than VAT registration.
Who is affected by MTD for Income Tax right now?
Sole traders and landlords with qualifying income over £50,000 are already in scope, with lower thresholds phasing in over the coming years.
Get your VAT and MTD obligations sorted
Book a free consultation and we'll check your registration status and MTD phase.