Making Tax Digital (MTD) for limited companies paying Corporation Tax has been permanently cancelled. However, although MTD for Corporation Tax isn’t going ahead, limited companies registered for VAT are still required to comply, and some directors may also be affected by the upcoming Income Tax changes this April.
To learn more about MTD for limited companies and how they may be affected, continue reading.
What are Limited Companies?
Limited companies in the UK are distinct legal entities that are separate from their owners and managers (shareholders and company directors). Essentially, this means that limited companies have their own assets and debts, rather than the individuals themselves. Shareholders have limited liability, which protects them from financial risk and protects their personal assets if the limited company were to ever go into debt.
Overview of Making Tax Digital (MTD)
MTD is a government initiative to make the tax system digital. It requires various businesses and landlords to maintain digital records and send quarterly updates to HMRC using MTD-compatible software.
Since April 2019, VAT-registered businesses with taxable turnover above the VAT threshold of £90,000 have had to comply with digital rules. As of April 2026, sole traders and landlords with qualifying income over £50,000 must do the same and comply with MTD for Income Tax.
What Taxes Do Limited Companies Pay?
Limited companies in the UK pay Corporation Tax on taxable profits, and VAT if registered.
Value Added Tax (VAT)
Limited companies must register and pay Value Added Tax (VAT) if their taxable turnover exceeds the current threshold of £90,000 in one 12-month period. Since April 2019, VAT-registered limited companies must use MTD by submitting quarterly updates to HMRC, and payments are due one month and seven days after the end of the VAT quarter.
VAT rates are as follows:
- Standard rate – 20%
- Reduced rate – 5%
- Zero rate – 0%
Corporation Tax
All limited companies must pay Corporation Tax on taxable profits, such as trading or investment profits, after allowable expenses have been deducted. Payments for Corporation Tax are due nine months and one day after the end of the accounting period.
Corporation Tax rates are as follows:
- Up to £50,000 profits – 19%
- Over £250,000 profits – 25%
- £50,000-£250,000 profits – from 19% to 25%
Is Making Tax Digital for Corporation Tax Scrapped?
HMRC confirmed in their July 2025 Transformation Roadmap that MTD for Corporation Tax has been scrapped.
This means that limited companies do not need to comply with MTD rules by maintaining digital records and submitting quarterly updates regarding Corporation Tax payments. Instead, they must file their CT600 returns online through the HMRC Corporation Tax Online Service.
While MTD for Corporation Tax will not be introduced, limited companies must still follow the existing MTD rules if they’re VAT-registered.
Making Tax Digital for Limited Companies
There have been no further updates since 2025 regarding MTD for limited companies paying Corporation Tax. Therefore, MTD is not required for limited companies unless they are VAT-registered.
The same rules apply as they did from April 2019 for VAT-registered limited companies, and not much has changed since then regarding MTD. Although MTD for Corporation Tax has been discussed, it has been permanently cancelled. However, we generally advise maintaining digital records as best practice in case of potential changes in the near future.
Should Limited Company Directors with Additional Income Use Making Tax Digital?
Limited company directors with additional income must comply with MTD for Income Tax Self Assessment (ITSA) as of April 2026 if their gross income from self-employment or property exceeds the current threshold of £50,000. Company salary or dividends don’t contribute to this threshold, as MTD only applies to personal trading or property income.
Contact Our Limited Company Accountants
At LJS Accounting Services, we provide a wide range of tax and accounting support for limited companies. Our specialist team helps directors focus on their business, while we handle reporting and compliance.
We ensure your limited company accounts are submitted on time to both HMRC and Companies House, helping you avoid costly penalties. Our MTD accountants work closely with clients to maintain digital VAT records using MTD-compatible software, offering both VAT and Corporation Tax services.
To discuss how our accountants can help your limited company, please contact us today.
FAQs
Is tax going digital for a limited company?
Does Making Tax Digital affect directors who only draw a salary or dividends?
What happens if I don’t comply with Making Tax Digital rules?
Should limited companies still use digital records?
Limited companies that are VAT‑registered and exceed the taxable turnover must use MTD, but there is no legal requirement to use MTD for Corporation Tax.
However, we recommend digital records for limited companies to improve accuracy, ensure compliance, and prepare for future changes, such as Companies House digital filing, which is mandatory from 2027.
