Making Tax Digital (MTD) is supposed to make life easier: cleaner records, smoother submissions, and fewer “where on earth is that invoice?” moments at year-end.
In reality, the businesses that struggle with MTD don’t struggle because they’re doing anything wildly wrong. They struggle because a few small habits (copy/paste here, missing login there, VAT codes guessed on the fly) quietly build up until a filing gets rejected — or your year-end turns into a tidy-up marathon.
And because SMEs make up 99.85% of UK businesses (around 5.7 million), you’re in good company if any of this feels familiar.
Below are the 10 most common MTD mistakes we see, what they look like in real life, and what you can do now to avoid pain later.
Quick note: MTD applies to VAT already, and MTD for Income Tax starts rolling out from April 2026 for many sole traders and landlords, so getting your process right now will pay off twice.
Mistake 1: You’re not properly signed up (or authorised) for MTD
This one is frustrating because you can do everything else right… and still hit a wall.
What it looks like:
- Your software won’t connect to HMRC.
- You get errors like “client/agent not authorised”, “invalid credentials”, or you can’t see the return obligation.
- You assume “we’re VAT registered so we must be set up”.
Why it happens:
- The business hasn’t actually completed MTD sign-up for the tax.
- The Government Gateway login used in the software isn’t the one linked to the VAT registration.
- Agent authorisation isn’t in place (or has expired).
How to fix it:
- Confirm you’re signed up correctly for MTD (VAT and/or ITSA) and that the Government Gateway credentials match the business record.
- If you’re using an accountant, make sure the agent link is set up properly.
If you want someone to handle the setup end-to-end so you’re not battling login loops, start with VAT Returns or speak to the team via Contact Us.
Mistake 2: You pick software that isn’t actually suitable for your situation
MTD doesn’t mean “any spreadsheet will do” and it doesn’t mean “any bookkeeping app will do”.
For MTD for Income Tax, HMRC is clear that you’ll need commercial software that can create/store digital records, send quarterly updates, and submit the final declaration.
For MTD VAT, you also need compatible software to submit through HMRC’s systems.
What it looks like:
- You’ve got software that can do bookkeeping but can’t handle the submission properly.
- You’ve got a bridging solution that works… until your records don’t meet the digital link rules (more on that below).
- You’re paying for features you’ll never use, but missing the ones you need.
How to fix it:
- Choose software based on how you operate (sole trader, landlord, limited company, contractor) and the taxes you need to file.
- Get your chart of accounts and VAT setup right from day 1.
If you’re using QuickBooks, getting it configured properly is half the battle — Quickbooks Accountants is designed for exactly that.
Mistake 3: Broken “digital links” (manual copy/paste is the silent killer)
This is the classic MTD VAT trap.
MTD for VAT requires digital record keeping and sets expectations around how figures move from records to return (digital links are a key part of that).
What it looks like:
- You export totals into Excel, then manually retype or copy/paste into another sheet or bridging tool.
- You “just quickly adjust” a number before submitting.
- Nobody remembers how the VAT number on the return was calculated.
Why it matters:
Even if the submission goes through, manual steps create errors and make year-end painful because you can’t trace the journey from invoice → VAT → return.
How to fix it:
- Reduce manual steps. Use a system where the VAT return is built from properly coded transactions.
- If you do use spreadsheets, make sure your process is genuinely digital end-to-end (and documented).
A simple, consistent bookkeeping workflow via Book Keeping usually prevents this mistake entirely.
Mistake 4: Incorrect VAT number or business details (easy rejection)
Rejections aren’t always about the numbers. Sometimes the submission fails because the business details don’t match HMRC records.
What it looks like:
- “Invalid VRN” or “VAT number incorrect”
- You can’t access the right VAT obligations/period
- The software account is set up under the wrong legal entity (common after incorporating)
This is a known, common category of submission issues across software providers and troubleshooting guides (wrong VRN, incorrect credentials, or not being signed up).
How to fix it:
- Check the VAT registration number in your software and confirm it matches HMRC records.
- If your business structure changed (sole trader → limited company), treat it as a new setup, not a continuation.
If you’ve recently incorporated, Limited Company Accountants is the right place to start.
Mistake 5: You’re filing the wrong VAT period (or you can’t see the obligation)
This catches people who are otherwise organised.
What it looks like:
- Your VAT quarter dates don’t match what you expected.
- Your “return due” screen is blank.
- You submit, but later realise you filed for the wrong period or duplicated a return.
Why it happens:
- Obligation dates haven’t pulled through properly due to authorisation issues or software connection problems.
- You’ve changed the VAT stagger group and not updated internal processes.
- Someone filed manually elsewhere.
How to fix it:
- Always check the obligation period inside the software before you hit submit.
- Reconcile against HMRC obligation dates (your accountant can do this quickly if you share access).
If you want more visibility month to month (not just at VAT time), Financial Reports helps you spot problems before they land.
Mistake 6: VAT coding is inconsistent (so your VAT return is built on sand)
If your VAT codes aren’t consistent, your VAT return becomes “best guess accounting”.
What it looks like:
- VAT looks too high/low compared to sales.
- Reverse charge transactions are treated like standard-rated purchases.
- Imports, EU services, or mixed supplies are coded randomly.
- You spend hours at year-end explaining weird balances.
How to fix it:
- Set a basic VAT coding rule and follow it every time.
- Create a “VAT questions” list (imports, mixed supplies, mileage, entertainment, etc.) and decide how you handle them consistently.
- Don’t let multiple team members code transactions without a simple guide.
If you’re not sure what “good” looks like for your business type, start with Small Business Accountants and build a repeatable process.
Mistake 7: You treat your bank feed like “the accounts”
Bank feeds are helpful, but they’re not the full story.
What it looks like:
- Sales invoices exist in one system, bank receipts in another.
- You’ve got income in the bank that isn’t allocated to a customer invoice.
- You’ve got payments out that aren’t matched to supplier bills.
- Your VAT is wrong because the invoice date and payment date are being mixed up.
How to fix it:
- Use invoices and bills properly, not just bank transactions.
- Make sure your bookkeeping ties back to source documents (invoices/receipts), not just the bank.
If you need your records cleaned up and kept clean, that’s exactly what Book Keeping is for.
Mistake 8: You mix personal and business transactions (then MTD turns into detective work)
This is one of the biggest reasons year-ends go messy.
What it looks like:
- Personal spending appears in the business account.
- Business spending happens on a personal card.
- You can’t remember what half the transactions were by the time the VAT return is due.
- Director loan balances are unclear.
How to fix it:
- Separate accounts wherever you can.
- If you do mix occasionally, label it immediately (same day/that week), not “later”.
If you’re a contractor or you’re constantly on the move, this happens more than people admit — the key is having a tidy system and someone checking it regularly. See Contractors for a setup that fits fast-moving work.
Mistake 9: You leave reconciliation until the last minute (VAT control, PAYE, and suspense build up)
Reconciliation is one of those tasks nobody enjoys… but it’s what stops your year-end becoming a rescue mission.
What it looks like:
- Your VAT control account doesn’t match the VAT liability.
- PAYE/NIC balances are drifting.
- “Suspense” keeps growing.
- The year-end accounts take longer and cost more because the books aren’t ready.
How to fix it:
- Reconcile monthly if you can; quarterly at an absolute minimum.
- Have a checklist that covers bank, VAT, payroll, and key control accounts.
If payroll is involved, that’s another area where small errors cause big clean-up jobs — Payroll Services keeps that side tidy.
Mistake 10: You assume MTD is “just VAT” and ignore the April 2026 change for Income Tax
This one is creeping up on a lot of sole traders and landlords.
From April 2026, many self-employed people and landlords will need MTD-compatible software to keep digital records, send quarterly updates, and submit the final declaration (HMRC’s guidance is explicit about what the software must do).
What it looks like:
- You’re still saving receipts in a folder and adding them up once a year.
- You don’t know whether your qualifying income will put you in scope.
- You plan to “deal with it next year”.
How to fix it (now, not later):
- Start keeping digital records properly this quarter.
- Move to a simple cloud bookkeeping routine so quarterly updates aren’t scary.
- Get your Self Assessment process organised so you’re not trying to transition during peak deadline season.
If you’re self-employed, Sole Trader Accounting is the most direct route to getting ready.
A quick “MTD-safe” checklist you can use every month
If you want to avoid 90% of MTD problems, keep it boring and consistent:
- Reconcile bank accounts monthly
- Code VAT consistently (don’t guess)
- Upload/save receipts as you go
- Match bank payments to invoices/bills
- Review VAT control and PAYE balances monthly/quarterly
- Check you can still connect to HMRC well before deadline day
- Keep notes for anything unusual (one-off purchases, refunds, partial exemptions, etc.)
And remember: the VAT registration threshold is £90,000 (rolling 12-month taxable turnover), so as you grow, VAT and MTD admin becomes unavoidable anyway.
Next steps
If you want MTD to feel straightforward (not stressful), Asmat & Co can help you set up the right software, keep your records tidy, and make sure your submissions go through cleanly — without the last-minute scramble.
Start by looking at Services and then book a chat via Contact Us. If you need help right now with a messy VAT setup or year-end cleanup, begin with VAT Returns or Company Accounts and we’ll get things back under control.
