Making Tax Digital (MTD) and e-invoicing are two different rules. MTD for VAT is about how you keep VAT records and send your VAT return to HMRC. E-invoicing, mandatory for VAT invoices from April 2029, is about how invoices travel between you and your customers or suppliers.
They overlap because both depend on software, and the same software will probably do both jobs. But being MTD-ready does not make you e-invoicing-ready.
The short version
| Making Tax Digital for VAT | E-invoicing mandate | |
|---|---|---|
| What it covers | Keeping digital VAT records and filing VAT returns through compatible software | Issuing and receiving VAT invoices as structured data |
| Who it is between | Your business and HMRC | Your business and other businesses or public bodies |
| When | Since April 2019 (turnover above £85,000); all VAT-registered businesses from 1 April 2022 | From April 2029 |
| Data goes to HMRC? | Yes, VAT return figures | Not at launch: no real-time reporting in 2029 |
| Format | Any compatible software or bridging software | A specified electronic format, exchanged over Peppol |
| Status | In force | Confirmed in principle; detailed rules due in the roadmap at Budget 2026 |
What MTD for VAT requires
HMRC's press release of 28 March 2022 put it plainly: "All VAT-registered businesses must use MTD for VAT for their first VAT return starting on or after 1 April 2022." Businesses with taxable turnover above £85,000 had already been required to follow MTD since April 2019.
Under VAT Notice 700/22, you must keep certain records digitally in functional compatible software, and data moving between programs must travel through "digital links". Copying and pasting does not count.
Notice what MTD does not say: it does not dictate the format of the invoices you send to customers. Today you can still send a PDF, or even a paper invoice, and comply with MTD as long as the records feeding your VAT return are digital. HMRC's electronic invoicing notice (VAT Notice 700/63) currently says it is up to you whether you issue paper or electronic VAT invoices.
MTD is also expanding beyond VAT. MTD for Income Tax started in April 2026 for sole traders and landlords with qualifying income over £50,000, with the threshold dropping to £30,000 from April 2027 and £20,000 from April 2028, according to HMRC's Transformation Roadmap update 2026.
What the e-invoicing mandate requires
The Budget 2025 document says: "The government will require all VAT invoices to be issued in a specified electronic format from April 2029." That covers business-to-business (B2B) and business-to-government (B2G) VAT invoices.
An e-invoice is structured data the buyer's system can read automatically. The consultation was explicit that PDFs, Word files, images, HTML invoices and faxed or scanned invoices are not e-invoices. On 23 June 2026 the government announced that Peppol will be "the core interoperability network for e-invoicing in the UK".
So where MTD changed what happens after an invoice exists, e-invoicing changes the invoice itself.
How the two fit together
The government sees them as complementary. The consultation document said decentralised e-invoicing models "can be complementary to Making Tax Digital and further build on the business and tax benefits observed in the digitalisation of business records."
In practice, the link works like this:
- Your software creates an e-invoice and sends it over Peppol.
- Your customer's software receives it and posts it straight into their ledger, with no retyping.
- Both sides now have accurate digital records of the same transaction.
- Those records feed each business's MTD VAT return, as they do today.
The government also expects MTD software providers to be a main route to e-invoicing. The consultation response noted it is "aware of several MTD providers focused on the small business market that are already able to provide e-invoicing services."
Where they differ in an important way: HMRC's view
With MTD, HMRC receives your VAT return figures through an API. With e-invoicing at launch, HMRC does not receive your invoices. The consultation response says the government "will not introduce it [real-time reporting] alongside the e-invoicing mandate in 2029", and that any later reporting would build on the e-invoicing infrastructure. See Will HMRC require real-time reporting?.
Separately, the Budget 2025 document announced real-time digital prompts in VAT filing software from April 2027. Those prompts are about catching errors in VAT returns. They are not invoice reporting.
Who is caught by which rule?
- VAT-registered business: already within MTD for VAT; within the e-invoicing mandate from 2029 for VAT invoices it issues.
- Not VAT-registered: outside MTD for VAT. The consultation response says businesses not required to register, and that choose not to, "will not be obliged to adopt this technology." You may still receive e-invoices from suppliers. See E-invoicing for non-VAT-registered businesses.
- Sole trader in MTD for Income Tax only: MTD for Income Tax is about self-employment and property income records. Whether you must e-invoice depends on whether you are VAT-registered.
What is not yet confirmed
- The exact invoice specification (for example, whether the UK adopts Peppol BIS Billing 3.0 as it stands or a UK CIUS).
- How software and Access Points will be accredited, and whether HMRC will run a recognition list like the MTD software list.
- Penalties for e-invoicing failures. Respondents asked whether these would mirror MTD; the government has not said.
These are expected to be covered, at least in outline, in the roadmap due at Budget 2026 on 28 October 2026.
What to do now
- Ask your current MTD software provider whether it supports sending and receiving e-invoices over Peppol, and what it plans for 2029.
- Do not assume an "MTD-compatible" label covers e-invoicing.
- If you use bridging software with spreadsheets, start planning: e-invoices need to be generated and received by a system, not typed into a spreadsheet.
- Read our guides to checking your software's Peppol support and the UK e-invoicing readiness checklist, and keep an eye on the timeline.
Frequently asked questions
Is e-invoicing part of Making Tax Digital?
No. They are separate requirements. MTD for VAT covers digital records and filing VAT returns through software; the e-invoicing mandate covers the format VAT invoices are exchanged in from April 2029. The government has said decentralised e-invoicing is complementary to MTD.
If my software is MTD-compatible, does it support e-invoicing?
Not necessarily. MTD compatibility means the software can keep digital records and file VAT returns with HMRC. Sending and receiving e-invoices over Peppol is a different capability, so ask your provider directly.
Will e-invoices be sent to HMRC like MTD VAT returns?
Not at launch. The government has said real-time reporting will not be introduced alongside the 2029 mandate. VAT will still be reported through your VAT return.
Spotted a mistake? Report an error. einvoices.uk is an independent publication and is not affiliated with HMRC. Details of the mandate may change; check the sources and official GOV.UK guidance before acting.