Making Tax Digital (MTD) is designed to simplify tax, but for many small business owners, it can feel like just another layer of admin.
And while MTD compliance is now a legal requirement for VAT-registered businesses, mistakes are still surprisingly common.
In this post, we highlight the most frequent MTD mistakes small businesses make, and how to avoid them.
1. Using the Wrong Software
Not all bookkeeping software is MTD-compatible.
Some businesses assume that any digital tool will do, but only HMRC-recognised software can connect directly to submit VAT returns under MTD.
Avoid it: Always check HMRC’s list of approved software providers and make sure yours is properly set up.
2. Failing to Keep Digital Records
Under MTD, keeping paper records or manually updating spreadsheets isn’t enough.
Businesses must maintain digital records of all sales and expenses.
Avoid it: Ensure your bookkeeping software captures transactions digitally, and ditch the manual systems.
3. Missing Submission Deadlines
Even with the right software, some businesses forget to submit their VAT returns on time.
MTD doesn’t change your deadlines, it just changes how you submit.
Avoid it: Set calendar reminders or automate submissions through your software to stay on track.
Download our free Taxes Made Simple guide which breaks down all you need to know about taxes as a UK business owner.
4. Incorrect VAT Calculations
Submitting incorrect figures can lead to penalties.
This often happens when businesses rely on outdated templates or manual calculations.
Avoid it: Let your software calculate VAT automatically, and cross-check entries before submission.
5. Using Spreadsheets
MTD rules state there must be a digital link between records and submissions, copy-pasting doesn’t count.
Avoid it: Use bridging software or switch to a fully integrated accounting solution.
6. Not Notifying HMRC Of Changes
If you’ve changed software, VAT scheme, or business structure, HMRC needs to be informed.
Not updating your records could delay or block submissions.
Avoid it: Keep your HMRC account up to date, and notify them of any significant changes.
Final Thoughts: What’s Best for You and Your Business?
Avoiding MTD mistakes doesn’t just keep you compliant, it makes your bookkeeping smoother and more accurate.
If you’re unsure whether you’re doing things correctly, it’s far better to check now than deal with penalties later.
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