Worked Examples
Example: MTD VAT Submission Walkthrough
Step-by-step example of preparing and submitting a Making Tax Digital VAT return using accounting software.
Quick answers
How do you submit a VAT return under MTD?
Keep digital records throughout the quarter using MTD-compatible software, run the VAT return in the software (which auto-fills the 9 boxes from your records), review for accuracy, and submit directly to HMRC from the software. The return and payment are due 1 month and 7 days after the quarter end.
What are digital links under MTD?
Digital links are unbroken electronic transfers of data from one system to another — for example, an export-import file, an API call, or a formula linking spreadsheet cells. Manually retyping figures between systems breaks the digital-link requirement.
What's in each VAT return box?
Box 1: VAT on sales. Box 2: VAT on EU acquisitions (rare post-Brexit). Box 3: total of 1+2. Box 4: VAT reclaimed on purchases. Box 5: net VAT to pay or reclaim. Box 6: total sales net of VAT. Box 7: total purchases net of VAT. Boxes 8 and 9: Northern Ireland EU trade.
This example follows a small ecommerce shop, Cottage Crafts Ltd, through one quarter under MTD for VAT.
Setup checklist
Before the quarter starts:
- VAT registered with HMRC.
- HMRC normally signs up VAT-registered businesses for MTD automatically unless exempt; confirm the business’s status and authorise compatible software.
- Authorised MTD-compatible software (e.g. Xero, QuickBooks, FreeAgent).
- Bank feeds connected for automatic transaction import.
Through the quarter
Each transaction must be recorded digitally with enough detail to identify:
- The supply and the VAT rate applied.
- The date.
- The net amount and the VAT amount.
Example sales day:
| Date | Customer | Net | VAT (20%) | Gross |
|---|---|---|---|---|
| 12 Feb 2026 | Online order #4831 | £100.00 | £20.00 | £120.00 |
| 12 Feb 2026 | Online order #4832 | £45.00 | £9.00 | £54.00 |
Purchases similarly captured with VAT split.
End of quarter (31 March 2026)
- Reconcile the bank — every transaction matched to a sale or purchase.
- Check VAT codes — particularly for zero-rated, exempt, and reverse-charge items.
- Run the VAT return in the software:
| Box | Description | Amount |
|---|---|---|
| 1 | VAT due on sales | £8,400 |
| 2 | VAT due on EU acquisitions | £0 |
| 3 | Total VAT due (1 + 2) | £8,400 |
| 4 | VAT reclaimed on purchases | £1,950 |
| 5 | Net VAT due (3 − 4) | £6,450 |
| 6 | Total sales (ex VAT) | £42,000 |
| 7 | Total purchases (ex VAT) | £9,750 |
| 8 | EU goods supplied | £0 |
| 9 | EU goods acquired | £0 |
- Review — does the VAT/sales ratio look right (~20%)?
- Submit directly to HMRC from the software (no copy-paste — that breaks digital links).
- Pay £6,450 by Direct Debit, BACS or Faster Payment.
Deadline
Both submission and payment due 7 May 2026 (1 month + 7 days after 31 March).
Common issues
- Manually retyping figures between systems breaks the digital-link rule — you need bridging software or properly linked spreadsheets.
- Mis-coding zero-rated sales as standard-rated overstates Box 1.
- Missing reverse-charge items on EU services or domestic CIS subcontractor work.
- Failing to authorise compatible software or check an exemption; a separate manual MTD signup is not normally required.
This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.
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