Who Needs to Use Making Tax Digital (MTD) for Corporation Tax?

As the UK modernises its tax system, the question arises: who needs to use Making Tax Digital (MTD) for Corporation Tax? The transition to MTD has significant implications for businesses, making it an essential read for anyone involved in corporate finance or tax compliance.

Understanding Making Tax Digital (MTD)

MTD is a crucial part of the government’s plans to make it easier for individuals and businesses to manage their tax affairs. It’s a mandate to keep digital records and submit digital tax returns, transforming how taxes are managed in the UK.

Implications for Corporation Tax

Corporation tax will transition to MTD in April 2026, but businesses must prepare well in advance. Companies must use MTD-compliant software to calculate tax liabilities, maintain digital records, and submit corporation tax returns.

MTD for VAT and Income Tax

HMRC introduced MTD for VAT first, which required businesses with a taxable turnover above the VAT threshold to keep digital records and submit VAT returns using MTD-compatible software. MTD for Income Tax Self-Assessment (ITSA) is set to follow, transforming how income tax is reported and paid.

Quarterly Reporting Under MTD

One of the significant changes with MTD is the introduction of quarterly reporting. This means businesses will have to send quarterly updates to HMRC using MTD-compliant software with details of their income and expenses, ensuring a more accurate and timely understanding of their tax position.

Are There Any Exemptions?

There are a few exemptions from MTD, including those for whom it’s not reasonably practical to use digital tools due to age, disability, or geographical remoteness. Some insolvency procedures and religious exemptions are also applicable.

In conclusion, MTD is an integral part of modernising tax in the UK, with wide-ranging impacts on how businesses manage their tax affairs.

Key Takeaways:

• MTD for corporation tax will apply in April 2026.
• MTD mandates maintaining digital records and submitting digital tax returns.
• Businesses will need to use MTD-compatible software.
• MTD also affects VAT and Income Tax.
• Quarterly reporting is a significant change under MTD.
• There are a few exemptions from MTD.