MTD for Limited Companies - Rules, requirements and what you need to do

Making Tax Digital, or MTD, is transforming how businesses manage tax across the UK. MTD aims to modernise the UK tax system, reduce errors, and make compliance more efficient.

However, if you run a limited company, you need to know what the current MTD for limited companies rules are, whether your business needs to act now, and what changes are still to come.

The reality is that Making Tax Digital is already affecting many businesses, particularly VAT-registered companies. For directors, the challenge is understanding what applies now, what HMRC confirmed, and how to prepare your business for future digital requirements without creating unnecessary work and stress.

This guide explains everything limited companies need to know.

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s long-term plan to digitise the UK tax system. Instead of relying on paper records, manual submissions, and disconnected spreadsheets, businesses are expected to use approved software that supports digital record-keeping.

The core objective is simple: to make tax administration more accurate, more efficient, and easier for businesses and taxpayers alike. Under Making Tax Digital, businesses need to:

• Keep digital records.
• Maintain digital record-keeping processes.
• Use MTD compatible accounting software.
• Store records digitally.
• Meet digital requirements set by HMRC.
• Submit quarterly updates where applicable.

Does MTD apply to limited companies?

Yes, but not in exactly the same way for every tax. This is where many directors become confused.

Limited companies are already affected by Making Tax Digital if they are VAT registered.

While HMRC continues to expand its digital approach, as of mid-2026, it has confirmed it does not intend to introduce mandatory Making Tax Digital (MTD) for Corporation Tax, following the HMRC Transformation Roadmap published in July 2025.

It is worth noting that if you also have personal income tax obligations outside your company, separate MTD for Income Tax rules may apply to you as an individual.

MTD for VAT-registered companies

For MTD for VAT, the rules apply to all VAT-registered businesses, not just those above the VAT threshold. Limited companies with taxable turnover above the VAT registration threshold (currently above £90k) must register for VAT and comply with MTD requirements.

The same rules also apply to limited companies below the threshold that have chosen to register voluntarily for VAT. Even if VAT registration is voluntary, once a business is VAT-registered, it must follow the same Making Tax Digital obligations as any other VAT-registered company.

VAT-registered limited companies must:

• Keep digital records.
• Use MTD compatible accounting software.
• Submit VAT returns through software rather than manually.
• Ensure accurate record keeping throughout the accounting period.

The expectation is not simply filing online; it is maintaining compliant digital systems that support accurate tax reporting.

What about Corporation Tax?

Following the HMRC Transformation Roadmap published in July 2025, HMRC has confirmed, as of mid-2026, that it does not intend to introduce mandatory Making Tax Digital (MTD) for Corporation Tax.

For now, limited companies can continue using the current Corporation Tax filing arrangements.

How income tax affects company directors

Even if your limited company may not be directly affected by MTD rules, you as an individual might be through Making Tax Digital for Income Tax.

MTD for Income Tax applies to qualifying individuals, not companies. So if you earn rental income, freelance income, or operate as one of many sole traders in addition to your limited company, MTD for Income Tax rules could apply.

What happens if businesses do not comply?

Failing to meet MTD obligations can create problems and mean that your business may face:

• Late filing consequences.
• Compliance penalties.
• Incorrect reporting risks.
• Greater HMRC scrutiny.
• Administrative disruption.

Good MTD compatible accounting software and the right accountant, such as DNS accountants, can significantly reduce these risks.

Choosing the right accounting software for MTD

Not all software solutions are equal. Choosing software that genuinely supports MTD compliance is essential. Look for software that helps your business:

• Keep digital records.
• Submit returns directly to HMRC.

At dns accountants, our leading accounting software package, Nomi has been built by accountants who understand the day-to-day challenges that individuals and business owners face every day with their bookkeeping, accounts, MTd requirements and tax.

What limited companies should do now

If you run a limited company, the practical next steps depend on your current position.

If you are VAT registered

Your business should already be submitting VAT returns via MTD compatiable software.

If you are not VAT registered

There may be no immediate mandatory MTD obligations for your company. However, if you are nearing the VAT-registration threshold (businesses with £90k of turnover or over), preparing now makes commercial sense.

Prepare by:

• Improving record-keeping.
• Moving away from manual processes.
• Introducing approved MTD software such as Nomi by dns accountants.
• Strengthening digital systems.
• Reviewing accounting workflows.

MTD for Income Tax and personal income

From 6 April 2026, MTD for Income Tax applies to some limited company directors, but only where they receive qualifying income above the relevant threshold.

The limited company itself does not fall within the scope of MTD for Income Tax, directors with additional income from self-employment or property may be affected personally.

Income received through PAYE salaries or dividends from the company does not count towards the threshold. Instead, qualifying income includes gross rental income from UK or overseas property, along with turnover from self-employed work or side businesses.

The rollout of MTD for Income Tax is happening in stages, with individuals earning more than £50,000 in qualifying income required to comply from April 2026, those earning above £30,000 from April 2027, and those earning above £20,000 from April 2028.

If you fall within these thresholds, you will need to keep digital records, use compatible software, submit quarterly updates to HMRC, and complete a final end-of-year declaration.

Check whether MTD applies to you if you receive:

• Property income.
• Sole traders income.
• Other taxable earnings.

Why planning ahead matters

Making Tax Digital is not simply a compliance update. It represents a structural shift in how tax works for businesses and individuals across the UK.

HMRC continues to move towards greater digitisation, and businesses that adapt early are likely to benefit from smoother compliance, fewer errors, and less disruption. Waiting until deadlines arrive often leads to rushed decisions, poor software choices, and avoidable stress.

How dns accountants can help

At dns accountants, we help limited companies make practical sense of Making Tax Digital.

We support businesses with:

• MTD compliance reviews.
• Software selection.
• VAT filing support.
• Digital record-keeping improvements.
• Corporation tax planning.
• Income tax guidance for directors.
• Ongoing compliance support

Whether you need help choosing software, understanding quarterly updates, or preparing for future changes, expert advice makes the process much easier.

Summary

Making Tax Digital is already changing how businesses manage tax. For VAT-registered companies, compliance is already required. For income tax, many individuals, including directors with additional earnings, will be subject to MTD obligations. The key is having a good accountant and early preparation.

Businesses that keep digital records, use effective software, and build strong digital systems will be far better placed in the future, not only to comply with MTD record-keeping requirements but also to better manage their business.

If you are unsure where your business stands, dns accountants can help you prepare with confidence. Call 03300 88 66 86, or e-mail us at [email protected] for all your MTD requirements.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.