Does Making Tax Digital affect ltd companies?

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As of 2026, Making Tax Digital (MTD) for Corporation Tax has been officially cancelled by the government. This means limited companies do not have to worry about the new quarterly reporting rules that were once planned for their annual tax returns.

However, limited companies must still follow MTD rules for VAT if they are registered.

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The Current State of MTD for Limited Companies

If you run a limited company, here is exactly how the MTD rules look for you right now:

1. MTD for VAT (Mandatory)

If your limited company is registered for VAT, you must use Making Tax Digital. This has been the law since 2022. It means:

• You must keep your records digitally (using software like Xero, QuickBooks, or FreeAgent).
• You must send your VAT returns to HMRC directly through that software.
• You cannot use the old HMRC manual portal to type in your figures.

2. MTD for Corporation Tax (Cancelled)

In July 2025, the government officially scrapped the plans to bring MTD to Corporation Tax.

• The Old Way is Staying: You will continue to file your Company Tax Return (form CT600) once a year, just as you always have.
• No Quarterly Updates: You do not need to send quarterly digital updates for your company’s profits.

3. MTD for Income Tax (Does Not Affect the Company)

This is the part that often confuses people. MTD for Income Tax (ITSA) started in April 2026 for sole traders and landlords earning over £50,000.

• It’s Personal: This rule only applies to individuals.
• Company Owners: If you take a salary or dividends from your limited company, that income is not part of MTD for Income Tax. You still report those through your usual Self Assessment.

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Summary Table: What Do You Need to Do?

Tax Type	Affects Ltd Companies?	What is required?
VAT	Yes (if registered)	Use software for records and returns.
Corporation Tax	No	File your annual CT600 as normal.
Income Tax	No	Salary/Dividends are reported via Self Assessment.

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Why did the rules change?

The government decided to cancel MTD for Corporation Tax to reduce the “red tape” and costs for small businesses. They realized that asking limited companies to report four times a year was too much work for very little benefit to the taxpayer.

What should you do now?

Even though you don’t have to use MTD software for Corporation Tax, most accountants still recommend it. Using digital tools makes it much easier to:

• See how much profit you’ve made in real-time.
• Estimate your tax bill so you aren’t surprised at the end of the year.
• Keep your receipts organized so you don’t lose them.

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