MTD stands for Making Tax Digital, HMRC's programme for moving tax records and returns out of paper and out of retyped totals. For VAT it is not a new tax and it does not change what you owe. It changes two things about how you arrive at the figure: the records behind the return have to be kept digitally, and the return has to reach HMRC from software rather than being typed into a web form.
Two obligations, not one
The first is the record: sales and purchases have to be captured and kept in a digital form, with the transfer between one piece of software and the next made by a digital link rather than by copying a figure across by hand. The second is the submission: virtually all VAT-registered businesses are required by law to submit their returns through functional compatible software and to pay electronically. Most confusion about MTD comes from people meeting the second obligation and assuming it satisfies the first, when retyping a total into a submission tool is exactly what the digital-links rule is aimed at.
What it does not change
The nine boxes are the same boxes. The return still normally covers a three-month accounting period, and the deadline is still one calendar month and 7 days after the period ends for both the return and the payment. The rates are unchanged, what is taxable is unchanged, and the arithmetic is unchanged: MTD is a rule about the plumbing between your records and HMRC, not about the tax. A business that already kept clean digital records was compliant on day one without changing a figure.
Spreadsheets are still allowed
A spreadsheet is a digital record, and MTD does not outlaw it. What it outlaws is the last step being manual: the nine box totals have to travel from the spreadsheet into HMRC by a digital link, which is what bridging software provides. That is why the free MTD tools exist as a category at all, and why the honest question for a sole trader with clean books in a spreadsheet is which bridge to use rather than which ledger to buy. Exemptions exist, but they are narrow: they cover people who object to using computers on religious grounds or who cannot get online.
Questions people ask about mtd meaning
What does MTD stand for?
Making Tax Digital, HMRC's programme for digital tax records and software-based submission. In a VAT context MTD nearly always means Making Tax Digital for VAT.
Does MTD mean I have to stop using a spreadsheet?
No. A spreadsheet is a digital record. What you cannot do is retype the totals into a web form: the figures have to reach HMRC through compatible software, which is what bridging software is for.
Does MTD change how much VAT I pay?
No. It changes how the records are kept and how the return is submitted. The rates, the boxes, the accounting period and the deadline are all unchanged.