The landscape of Making Tax Digital for limited companies has undergone dramatic shifts in recent months, leaving many limited company directors confused about their obligations. If you're running a limited company, you've likely heard conflicting information about quarterly digital reporting, mandatory software, and looming compliance deadlines.
Here's the straightforward truth: Making Tax Digital for Corporation Tax (CT) has been withdrawn, with no replacement or future timetable currently announced by HMRC. However, your limited company may still have MTD obligations depending on your specific circumstances.
This comprehensive guide cuts through the confusion, explaining exactly which Making Tax Digital requirements apply to limited companies, what's changed, and the practical steps you need to take to remain compliant in 2026 and beyond.
Key Takeaways For Limited Companies Under MTD
MTD for Corporation Tax has been permanently cancelled, no quarterly reporting is required for limited companies
MTD for VAT remains mandatory for all VAT-registered companies and is currently the main MTD obligation for most limited companies
MTD for Income Tax affects company directors only if they have additional income from property or self-employment exceeding the thresholds
Digital record-keeping and MTD-compatible software are only mandatory where specific MTD requirements apply (VAT or qualifying Income Tax)
The cancellation of Corporation Tax MTD reduces compliance burden but doesn't eliminate the value of digital accounting for business efficiency
What Limited Companies Need to Know About Making Tax Digital in 2026?
Making Tax Digital is HMRC's initiative to modernise the UK tax system by requiring digital record-keeping and electronic submission of tax information through approved software. The rollout has been phased, with different taxes following different timelines.
MTD for Corporation Tax: What Has Changed?
HMRC has made a decisive shift in its Making Tax Digital strategy for Corporation Tax, bringing more clarity. The long-planned requirement for quarterly digital reporting has now been fully withdrawn, easing compliance pressure on limited companies.
Key Points for MTD for Limited Companies:
No quarterly digital updates required for Corporation Tax.
No mandatory MTD software needed for Corporation Tax filings.
Annual CT600 filing continues via traditional methods.
No changes to Corporation Tax payment deadlines.
MTD for VAT: Ongoing Requirements for VAT-Registered Companies
While MTD for Corporation Tax has been cancelled, the requirements for VAT-registered businesses remain in place. Companies must continue to comply with Making Tax Digital for VAT, ensuring that all VAT returns are submitted digitally.
What This Means for Limited Companies:
Digital record-keeping and MTD-compatible software required for VAT returns.
Software must connect to HMRC’s API platform for VAT submissions.
Digital links between multiple software products and spreadsheets are mandatory.
MTD for Income Tax: How It Affects Company Directors?
MTD for Income Tax applies to individuals with additional income from self-employment or property, but not to limited companies as entities. However, many directors may need to comply due to personal income.
Income thresholds for MTD Income Tax
What limited companies Need to Do To Stay Compliant?
Digital record-keeping is essential under MTD for VAT, and it’s also beneficial for compliance with MTD for Income Tax. Here's what you need to know about maintaining records and using compliant software:
What Is MTD-Compatible Software?
MTD software must be approved by and connect directly to HMRC’s digital channels.
Bank feed connections, receipt capture apps, and multi-currency support are essential features to look for.
Software must be able to manage your company’s VAT returns or income tax updates and automate as much of the process as possible to reduce errors and compliance risks.
Choosing MTD VAT Software
HMRC offers an online platform where businesses can select their specific criteria and requirements. By entering details such as whether you're a sole trader or have property income, and whether you prefer free or paid software, the platform can recommend software options tailored to your needs.
Look for software that offers integration with your accounting system and scalability for future growth.
How MTD Affects Directors: Income Tax and the Personal Impact
While MTD for Corporation Tax doesn’t affect limited companies directly anymore, many directors will need to comply with MTD for Income Tax if they have income from other sources like property or self employment. Directors with income from property or self-employment may fall under MTD Income Tax rules starting from 2026.
Quarterly updates and an annual final declaration will be required for directors whose combined income exceeds the prescribed thresholds.
Exemptions and Special Cases: Who Is Exempt from MTD Compliance?
Not all limited companies or directors will need to comply with MTD. There are exemptions available for certain cases, including:
Digital Exclusion Exemption
Available for those who cannot use digital tools due to:
Age
Disability
Religious reasons
Geographic location (no internet access)
Other valid reasons
These exemptions apply to both MTD for VAT and MTD for Income Tax. To apply for an exemption, you can do so through your HMRC online account or by calling the MTD helpline.
Conclusion
The cancellation of MTD for Corporation Tax represents a significant policy reversal that removes a major compliance burden from UK limited companies. For business owners who spent months preparing for quarterly digital reporting, this brings welcome relief and cost savings.
However, Making Tax Digital for limited companies directors hasn't disappeared entirely. VAT-registered companies must comply with MTD VAT requirements already in force. Directors with substantial property or self-employment income alongside their company roles will face MTD Income Tax obligations from 2026 onwards.
