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tax-deadlinesUpdated 2026-02-27

Does Making Tax Digital apply to limited companies?

Quick Answer

MTD for Income Tax does not apply to limited companies. Corporation Tax MTD has been cancelled by HMRC. However, VAT-registered limited companies must already use MTD for VAT.

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Detailed Explanation

Making Tax Digital for Income Tax Self Assessment (MTD ITSA) applies to individuals — sole traders and landlords. It does not apply to limited companies filing Corporation Tax.

HMRC originally planned to introduce MTD for Corporation Tax, but this was cancelled. There are no current plans to revisit it.

However, there are two important exceptions:

1. MTD for VAT

If your limited company is VAT-registered, you must already comply with MTD for VAT (mandatory since April 2022). This means keeping digital VAT records and submitting VAT returns through compatible software.

2. Directors with personal income

If you are a company director who also earns personal income from self-employment or UK property (e.g., rental income), and that personal qualifying income exceeds the MTD threshold (£50,000 from April 2026), **you are personally in scope** as an individual. Your company is not, but you are.

For directors who only take a salary and dividends from their limited company, MTD ITSA does not apply to that income.

Source: HMRC MTD ITSA Guidance — Scope and Exclusions

Real-World Examples

VAT-Registered Ltd Company

Your limited company turns over £200,000 and is VAT-registered. You must already use MTD for VAT to submit quarterly VAT returns through compatible software. MTD for Income Tax does not apply to the company.

Director With Rental Portfolio

You are the director of a limited company but also personally own three buy-to-let properties generating £60,000 gross rental income. Your company is not in scope for MTD ITSA, but you personally are — you must comply from April 2026.

Director Taking Only Salary and Dividends

You pay yourself a salary of £12,570 and dividends of £40,000 from your limited company. Neither salary (PAYE) nor dividends count as qualifying income for MTD ITSA. You are not in scope.

Common Mistakes to Avoid

  • Assuming that because your limited company earns over £50,000, it must comply with MTD ITSA — it does not.
  • Forgetting that MTD for VAT is already mandatory for VAT-registered limited companies.
  • Not realising that personal rental or self-employment income as a director can put you individually in scope.
  • Confusing Corporation Tax obligations with MTD ITSA — they are entirely separate regimes.

Will MTD for Corporation Tax ever be introduced?

HMRC cancelled plans for MTD for Corporation Tax. There are no current plans to reintroduce it, though the government could revisit this in future.

Do dividends count as qualifying income for MTD?

No. Dividends from your limited company do not count as qualifying income. Only gross self-employment and UK property income are included.

I run a partnership through a limited company — does MTD apply?

MTD ITSA does not currently apply to partnerships. Partnership inclusion has been deferred with no confirmed date.

Does my limited company still need to file Corporation Tax returns?

Yes. Corporation Tax returns (CT600) continue to be filed as normal through HMRC's online service. MTD does not change this process.

Practical Tips

  • If you are a director with personal rental or self-employment income, check whether your qualifying income exceeds the MTD threshold.
  • Ensure your limited company is already compliant with MTD for VAT if VAT-registered.
  • Do not invest in MTD ITSA software for your limited company — it is not required.
  • Keep personal and company finances clearly separated to avoid confusion about which MTD obligations apply to whom.

Related Questions

What is Making Tax Digital (MTD)?

Making Tax Digital is HMRC's initiative requiring businesses to keep digital records and submit returns using compatible software. VAT is already under MTD; Income Tax follows in April 2026.

When does Making Tax Digital for Income Tax start?

MTD for Income Tax Self Assessment starts in April 2026 for those with qualifying income over £50,000, April 2027 for £30,000+, and April 2028 for £20,000+.

What counts as qualifying income for Making Tax Digital?

Qualifying income is your combined gross income from self-employment and UK property (rental), measured before expenses. It is turnover, not profit. Employment income and dividends do not count.

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