Making Tax Digital for Limited Companies and Corporation Tax: What You Need to Know
Last updated: February 2026
If you run a limited company, you may be wondering whether Making Tax Digital affects you. The short answer: MTD does not currently apply to corporation tax, and HMRC has not set a date for it to begin. There is no mandatory MTD for Corporation Tax timetable in force. This article explains what that means in practice, what was proposed and then shelved, and what limited company directors should be aware of if they also have personal self-employment or property income.
MTD for Corporation Tax: no start date
HMRC consulted on extending Making Tax Digital to corporation tax in 2021. The consultation explored whether companies should be required to keep digital records and submit quarterly updates to HMRC, similar to the requirements being introduced for income tax self-assessment. Following the consultation, HMRC decided not to proceed with mandatory MTD for Corporation Tax. No legislation has been introduced, and no start date has been set.
This means your limited company’s corporation tax filing obligations have not changed. You continue to file a CT600 return annually through HMRC’s existing online services. The CT600 is already a digital submission, which is one of the reasons HMRC cited for not prioritising MTD for corporation tax at this stage.
Some commentators have speculated about future timelines, but as of February 2026, there is nothing confirmed. HMRC’s current focus is on rolling out MTD for Income Tax Self Assessment, which begins in April 2026 for individuals with qualifying income above £50,000.
What the consultation proposed
The 2021 consultation document suggested that MTD for Corporation Tax could mirror the income tax model: digital record-keeping requirements, quarterly summary updates submitted through compatible software, and a final year-end submission replacing the CT600. The consultation also considered whether the requirements would apply to all companies or only those above a certain turnover threshold.
HMRC received mixed feedback. Many respondents argued that the CT600 is already filed digitally, that companies generally have more sophisticated accounting systems than sole traders, and that the additional burden of quarterly reporting would be disproportionate for smaller companies. HMRC agreed to defer the project indefinitely.
It is possible that HMRC will revisit MTD for Corporation Tax at some point in the future, particularly once MTD ITSA is fully established across all three income tax phases. However, there is no indication of when this might happen, and any future proposal would require fresh consultation and legislation.
Limited company directors with personal income
This is where it gets relevant for many company directors. Even though your limited company is not affected by MTD, you personally may be caught by MTD for Income Tax if you have qualifying income from self-employment or UK property.
Qualifying income for MTD ITSA means your gross self-employment income plus your gross UK property income. Director’s salary and dividends from your own limited company do not count as qualifying income for MTD purposes, because they are PAYE employment income and investment income respectively. However, if you also have a sole trade or rental properties alongside your company, those personal income sources do count.
Worked example: Raj, a company director with rental income
Raj runs a software consultancy through a limited company. He pays himself a salary of £12,570 and draws dividends of £40,000. Neither of these is qualifying income for MTD. However, Raj also owns three buy-to-let properties generating £54,000 in gross rental income. His qualifying income for MTD purposes is £54,000 (property only, since his company income does not count). This exceeds the Phase 1 threshold of £50,000, so Raj must register for MTD ITSA from April 2026 for his property income.
Raj’s limited company continues filing its CT600 annually as before. His personal MTD obligation only relates to the rental income reported on his Self Assessment return. He will need MTD-compatible software for his property income and will submit four quarterly updates per year covering that income source.
Worked example: Fatima, a director with a side business
Fatima is the sole director of a marketing agency (limited company). She also runs a small freelance photography business as a sole trader, earning £18,000 per year. She has no rental property. Her qualifying income is £18,000, which is below the Phase 1 threshold (£50,000) and the Phase 2 threshold (£30,000). However, it is above the Phase 3 threshold (£20,000 or more from April 2028), so Fatima will not need MTD until April 2028 at the earliest, and only if her photography income stays at or above £20,000.
What about MTD for VAT?
MTD for VAT is a separate obligation that does apply to limited companies. If your company is VAT-registered, you are already required to keep digital VAT records and submit VAT returns through MTD-compatible software. This has been mandatory for all VAT-registered businesses since April 2022. The current VAT registration threshold is £90,000.
MTD for VAT and MTD for Income Tax are entirely separate systems. Being registered for one does not affect the other. Your company’s MTD VAT obligations continue regardless of what happens with corporation tax MTD.
Should you prepare for MTD Corporation Tax?
Given that no timetable exists, there is no urgency to prepare specifically for MTD Corporation Tax. That said, good digital record-keeping practices are sensible regardless of MTD. If your company already uses cloud accounting software like Xero, Sage, or QuickBooks, you are effectively maintaining the kind of digital records that MTD would require. There is nothing additional you need to do.
If your company still relies on paper records or disconnected spreadsheets, modernising your record-keeping has benefits beyond MTD compliance. Real-time visibility into your company’s financial position, easier collaboration with your accountant, and automatic bank feeds all save time and reduce errors. These benefits exist today, regardless of any future MTD requirements.
Common questions
Will MTD for Corporation Tax ever happen?
It is impossible to say with certainty. HMRC has not ruled it out, but there is no consultation, no draft legislation, and no proposed timeline. The earliest realistic window would be several years after MTD ITSA is fully established, which means 2030 at the very earliest, and that is speculation rather than policy.
Does my company need to change its accounting software?
Not for MTD purposes. If your company is VAT-registered and already uses MTD-compatible software for VAT returns, you are already compliant with all current MTD requirements for companies. No further software changes are needed.
I am a sole trader thinking of incorporating. Does that take me out of MTD?
If you incorporate your sole trade into a limited company and cease self-employment, your qualifying income from self-employment drops to zero. If you have no other qualifying income (no UK property), you would no longer be in scope for MTD ITSA. However, incorporating solely to avoid MTD is rarely a good idea, as the tax implications of incorporation are far more significant than the administrative burden of quarterly updates. Take professional advice before making this decision.
How Jack Ross can help
Whether you run a limited company, a sole trade, or both, Jack Ross Chartered Accountants can help you understand which MTD obligations apply to your specific circumstances. We handle company accounts, personal tax, and MTD compliance for clients across Manchester and beyond. If you need help with Xero setup for your company or personal income, our team can advise. Get in touch to discuss your situation.
