United Kingdom · VAT

UK VAT 2026: HMRC’s New Enforcement Push & Making Tax Digital Updates

HMRC is stepping up VAT enforcement in 2026 with expanded Making Tax Digital requirements and tighter checks on overseas sellers. Here is what UK and foreign businesses need to know.

HMRC steps up VAT enforcement in 2026

HMRC is intensifying its VAT enforcement in 2026, with expanded Making Tax Digital (MTD) obligations and far closer scrutiny of overseas sellers trading into the UK. Combined with the now fully operational points-based penalty regime, the message is clear: accuracy and timely filing matter more than ever. Here is what UK and foreign businesses need to know.

1. Making Tax Digital for VAT — now mandatory for all

Making Tax Digital for VAT is now mandatory for all VAT-registered businesses, regardless of turnover. That means:

• Keeping digital VAT records in compatible software
• Submitting VAT returns through MTD-compliant software via HMRC’s API
• Maintaining digital links between systems — no manual copy-paste between spreadsheets and filing tools

Businesses still relying on manual processes need to move to compliant software without delay.

2. Increased scrutiny of overseas sellers on UK marketplaces

HMRC is sharpening its focus on overseas sellers using UK online marketplaces. Marketplaces already carry VAT collection responsibilities for many transactions, and HMRC is now cross-checking seller registrations, import records, and marketplace data to identify under-declared VAT. Overseas sellers should ensure their UK VAT registration and marketplace details are fully aligned.

3. New compliance checks for cross-border B2C sellers

Cross-border business-to-consumer (B2C) sellers face new HMRC compliance checks in 2026. These checks target whether the correct VAT has been charged and remitted on sales to UK consumers, with particular attention to goods shipped from abroad and the treatment of import VAT.

4. Postponed VAT Accounting (PVA) for imports

Postponed VAT Accounting (PVA) lets VAT-registered importers account for import VAT on their VAT return rather than paying it at the border, improving cash flow. To use PVA correctly you must:

• Elect to use PVA on your import declaration
• Download your monthly postponed import VAT statement from HMRC
• Declare the import VAT as both output and input tax on the same return (where fully recoverable)

Errors in reconciling PVA statements are a common audit trigger, so keep your import records tidy.

5. VAT on low-value imports: the £135 rule

For consignments of goods not exceeding £135 in value, UK supply VAT generally applies at the point of sale rather than import VAT at the border. Common mistakes include misclassifying consignment value, failing to charge VAT at checkout, and confusing the £135 threshold with customs duty rules. Overseas sellers and marketplaces should review how they apply this rule.

6. The points-based penalty regime is now fully in effect

HMRC’s points-based penalty system for late VAT submissions and payments is now fully operational. Each late submission earns a penalty point; once you reach the threshold for your filing frequency, a fixed penalty applies, with further penalties for continued lateness. Separate interest and late-payment penalties apply to overdue VAT.

Conclusion

HMRC’s 2026 enforcement push raises the stakes for UK VAT compliance. With MTD now mandatory for all, tighter checks on overseas and cross-border sellers, and a fully active penalty-points regime, businesses should tighten their digital record-keeping, reconcile imports carefully, and file on time to avoid costly mistakes.