UK VAT Compliance Guide
The United Kingdom applies a standard VAT rate of 20% (reduced 5% / zero-rated) under the VAT Act 1994. The compulsory registration threshold is £90,000 annual turnover. Since April 2019, all VAT-registered businesses must comply with Making Tax Digital for VAT (MTD) — filing returns through HMRC-recognised software using digital record-keeping. Voluntary registration is possible below the threshold.
UK VAT compliance has two layers: the rates and registration threshold (set annually in the Budget), and the Making Tax Digital (MTD) regime that requires digital record-keeping and software-mediated filing. MTD is the part that catches small businesses — spreadsheet-and-paper bookkeeping no longer satisfies HMRC. The rates themselves are stable: 20% standard since 2011, 5% on home energy and certain goods, and a broad zero-rated band covering food, books, children's clothing, and most exports. The threshold moves in the Spring Statement; it was £85,000 until 31 March 2024 and is now £90,000.
VAT Rates
| Rate | Applies To |
|---|---|
| 20% | Standard rate — most goods and services |
| 5% | Reduced rate — domestic fuel and power, energy-saving materials, car seats, certain construction |
| 0% | Zero-rated — most food, books, children's clothing, prescription medicines, exports |
| Exempt | Insurance, financial services, education, health — no VAT charged and input VAT not recoverable |
Registration Thresholds
| Scheme | Threshold |
|---|---|
| Compulsory registration | £90,000 rolling 12-month turnover (increased from £85,000 on 1 April 2024) |
| Voluntary registration | Below £90,000 — register to recover input VAT, file the same way |
| Distance selling to NI (EU OSS) | Goods sold from GB to Northern Ireland remain under the Northern Ireland Protocol — €10,000 EU threshold applies for distance sales |
Filing Requirements
VAT return (under MTD)
Quarterly or monthly periods. Filed via HMRC-recognised MTD-compatible software (not the HMRC portal directly). Digital records must be kept in functional compatible software — no manual spreadsheet adjustments.
Making Tax Digital records
Every supply must be recorded digitally with the VAT amount. Changes use the digital audit trail — no correction by pen or separate spreadsheet. This is the core MTD obligation.
EC Sales List (Northern Ireland only)
Businesses in Northern Ireland making intra-EU supplies of goods file an EC Sales List — a legacy of the Northern Ireland Protocol. GB businesses do not.
E-Invoicing Status
Making Tax Digital (VAT Notice 700/22) requires digital record-keeping and software-mediated filing, but this is not the same as continuous transaction control (CTC) e-invoicing. HMRC has consulted on adopting e-invoicing more broadly but has not mandated it as of 2025. The MTD obligation is on the records, not the invoice format itself.
Key Deadlines
VAT return + payment: due one calendar month and 7 days after the period end (e.g. 7 May for the quarter ending 31 March). MTD records must be kept up to date throughout the period.
How Nika Helps
Nika captures every supplier invoice digitally — supplier name, VAT number, net, VAT, gross — on the day it arrives, from {price} per processed invoice. That gives the MTD-compatible accounting software complete, accurate data to file the return. Nika does not file the VAT return itself — MTD filing is the accountant or software's role.
What is Making Tax Digital for VAT?
MTD requires VAT-registered businesses to keep digital records and file VAT returns through HMRC-recognised software — not paper or standalone spreadsheets. It has applied to all VAT-registered businesses since April 2019.
When did the £90,000 threshold take effect?
1 April 2024. The previous threshold was £85,000. Monitor your rolling 12-month turnover — registration is required within 30 days of crossing it.