Free VAT Filing Software: The Portal HMRC Closed in 2022

You registered for VAT last month. You searched for free VAT filing software. HMRC's own website sent you to a list of commercial products starting at £10 a month. Something does not add up.

It is not a glitch. HMRC closed the door on free VAT filing in April 2022, and it did so deliberately, quietly, and with almost no public acknowledgement of what it meant for the millions of sole traders who would register for VAT in the years that followed.

The Tool That Used to Be Free

For most of Making Tax Digital's existence as a policy idea, sceptics pointed at one obvious flaw: HMRC had a perfectly functional free VAT return portal on GOV.UK. Businesses typed their figures into boxes, clicked submit, and that was that. It cost nothing. It worked. Millions used it.

The portal did not disappear overnight. From April 2019, businesses with taxable turnover above £85,000 were required to file through MTD-compatible software instead. The free portal still existed for those below the threshold, which at the time covered a significant portion of VAT-registered businesses. Then, in April 2022, HMRC extended the MTD for VAT mandate to every VAT-registered business, regardless of size or turnover. At that point, the old route effectively closed for anyone new to VAT.

What replaced it was not a government tool. HMRC directed businesses to a list of approved software products maintained on GOV.UK. The shortest subscriptions on that list start around £10 to £12 a month. A modest annual cost individually; a compulsory one collectively, across approximately 2.4 million VAT-registered businesses.

HMRC's own impact assessment for MTD for VAT, published ahead of the 2019 rollout, acknowledged that businesses would face one-off transition costs and ongoing software subscription costs. The department argued these would be offset by reduced errors and faster processing. That argument is easier to make when you are not the business paying the subscription.

The policy decision not to build a free government alternative was not accidental. It was a deliberate choice to outsource the infrastructure of mandatory tax compliance to private vendors, at compulsory cost to businesses with no legal opt-out.

What MTD for VAT Actually Requires of You

Before examining what is and is not free, it is worth being precise about what you are actually required to do. MTD for VAT has three core obligations:

Digital record-keeping. You must maintain records of your VAT transactions digitally. A paper ledger, even a perfectly accurate one, does not qualify. A spreadsheet may qualify, but only if it connects to your submission method via a digital link, with no manual copying of figures between systems.

Quarterly submissions. VAT returns are filed quarterly. You submit nine boxes of information to HMRC four times a year, using software that connects directly to HMRC's API. You cannot submit via a manual web form.

The digital link rule. If you use more than one piece of software in your record-keeping chain, each handoff between them must be a digital transfer, not a manual re-entry. This is the rule that catches most people using spreadsheets: copying a figure from Excel into a web form counts as manual intervention and breaks the digital link, regardless of how accurately you copied it.

What Free VAT Filing Software Actually Exists

The search term is not entirely hopeless. There are options. But each requires understanding what free actually means in this context, and what it does not cover.

Bridging software. This is software designed to sit between a spreadsheet and HMRC's API. You keep your records in Excel or Google Sheets, the bridging tool reads your totals, and submits them to HMRC via the approved channel. Several providers offer free tiers specifically for bridging, and some are genuinely usable for a sole trader with simple accounts.

The catch has two parts. First, you are responsible for maintaining the digital link between your spreadsheet and the bridging tool: the tool must import directly from the spreadsheet file, not from figures you have retyped into the bridging interface. Second, most free bridging tiers limit the number of submissions per year to a small number, or restrict access to error corrections and amended returns. If you file four VAT returns a year for several years, the free tier runs out faster than expected.

For a sole trader with genuinely straightforward finances and real spreadsheet competence, bridging software works. For anyone whose records involve multiple income sources, mixed-use expenses, or sub-contractor payments, the time cost of maintaining a compliant spreadsheet often exceeds the annual cost of a basic accounting subscription.

Free tiers of commercial software. Some accounting platforms offer permanently free tiers alongside their paid plans. The permanently free options typically cap the number of invoices or transactions per month, exclude automated bank feeds, and require manual data entry for anything beyond the most basic returns. At a turnover approaching £90,000 (the current VAT registration threshold), the volume of monthly transactions is rarely small enough to stay within a free-tier limit without data being left unrecorded.

HMRC's own tools. There are none for MTD for VAT. HMRC's published guidance states clearly that businesses must use third-party software to meet their MTD for VAT obligations. The department has not committed to building a free government alternative, despite the fact that self-assessment still has a government-provided filing route, for now.

This disparity, VAT filing mandated through private software while income tax can still be filed via a government portal, is one of the odder features of the MTD rollout. That income tax route will not survive April 2026 either: Free Tax Return Software: The Government Tool HMRC Never Built covers what replaces it.

The Penalty Maths for Getting This Wrong

HMRC introduced a new penalty points system for late VAT returns in January 2023. The old flat-rate surcharges were replaced with an accumulating points model: each late submission earns one point, and once you reach the threshold of four points (for quarterly filers), you receive a £200 penalty. Every further late return after that incurs an additional £200.

The points threshold resets only after a sustained period of compliant submissions. For a quarterly filer, that means four consecutive on-time returns after hitting the threshold, so the compliance clock does not start until you are already in arrears.

To make this concrete: a sole trader who misses all four VAT returns in a year receives four penalty points, a £200 fine, and faces a 12-month compliance clock before the points reset. If they miss quarters in the following year too, the fines stack. The total cost of two years of missed returns runs well into four figures, alongside any interest charges on unpaid VAT.

The cost of a basic MTD software subscription over the same two years: roughly £240 to £360 at current market rates.

This is the calculation HMRC is, in effect, making on your behalf. The choice is not between a free portal and paid software. It is between paid software and paid software plus penalties.

When VAT and Income Tax Compliance Collide

Here is the situation nobody explains clearly at VAT registration: crossing the £90,000 VAT threshold does not mean you have only one new HMRC obligation.

If your business income already exceeds £50,000, or is approaching it, you are also in scope for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), which becomes mandatory for sole traders and landlords with qualifying income above £50,000 from April 2026, and above £30,000 from April 2027.

MTD for ITSA is a completely separate system from MTD for VAT. It requires quarterly updates to HMRC about your income and expenses (not VAT data, but profit and loss data), plus a final end-of-year declaration. Five separate submissions per year, from compatible software. Not the same submissions as your quarterly VAT returns.

A sole trader turning over £95,000 who is also netting £55,000 in profit now faces:

• Four VAT returns per year via MTD-compatible software
• Four quarterly income updates per year via MTD-compatible software from April 2026
• One end-of-year income tax declaration

Three distinct HMRC submission types. Potentially two or three different software subscriptions if those tools do not overlap. The search for free VAT filing software risks optimising for one cost while missing the full picture of what compliance will require by 2027.

Best Free VAT Return Software Misses April 2026 Entirely covers this gap in detail. Free VAT Software Handles Only One of Your HMRC Deadlines explains what happens when a tool is built for quarterly VAT and nothing else.

What a Newly Registered Sole Trader Actually Needs

If you have just registered for VAT and are assessing your options, the most useful reframe is this: you are not choosing between free and paid. You are choosing between different paid options (including the hidden cost of your own time maintaining a compliant spreadsheet), and deciding whether to optimise for VAT alone or for your full compliance picture through 2027.

Four questions worth asking before committing to any tool:

Does it cover MTD for VAT submissions via the HMRC API, not just record-keeping? Digital records alone do not satisfy the legal obligation. The submission step is the part HMRC audits.

Does it maintain the digital link from record to submission without manual re-entry? If you are copying figures from one place to another by hand at any point in the chain, you are not MTD-compliant regardless of what the software's pricing page claims.

Does it handle MTD for Income Tax, or will you need a second product in April 2026? The cost of running two tools is often higher than one platform covering both from the outset.

What is the per-month cost for your actual transaction volume? Free tiers cap transactions. At a turnover of £90,000 across several hundred invoices per year, a 25-transaction monthly limit covers roughly one week's work.

What happens to your records if you cancel? Free Self Assessment Software: The Migration Problem covers data portability in detail; the same questions apply to your VAT records, which you are legally required to keep for six years.

The Honest Answer to the Search Query

Someone searching for free VAT filing software is usually asking a reasonable question prompted by a frustrating reality: you did not choose to register for VAT, the threshold chose you, and now the government that set that threshold is directing you to pay a private company for the privilege of complying with it.

That frustration is legitimate. HMRC retired its own free tool, mandated private software, and provided no free government alternative. The department argues commercial software delivers better functionality and reduces errors. Critics argue the policy offloads infrastructure costs onto small businesses with no alternative. Both things can be true simultaneously.

What is not in dispute is the practical outcome: the free option most people imagine does not exist for new VAT registrants. The cheapest compliant route is a low-cost MTD software subscription, ideally one that covers both VAT and income tax so you are not solving the same problem twice before 2027.

If you registered for VAT this year, the most useful next step is not hunting for the cheapest possible tool for this quarter's return. It is calculating your full compliance cost through 2027, then choosing a platform that covers the whole picture from a single subscription.