Does Making Tax Digital apply to limited companies?
It depends on the scheme. MTD applies differently to limited companies depending on which tax is involved. The short answer: if your company is VAT-registered, MTD for VAT applies now and has since April 2022. If you’re not VAT-registered, no MTD obligation currently applies. MTD for Corporation Tax will apply in the future but no date is set.
| MTD scheme | Applies to limited companies? | Status |
|---|---|---|
| MTD for VAT | Yes, if VAT-registered | Mandatory since 1 April 2022 |
| MTD for Income Tax | No | Not applicable to companies |
| MTD for Corporation Tax | Yes (future) | No mandatory date set |
MTD for VAT: what limited companies must do
Every VAT-registered business in the UK must comply with MTD for VAT — legal structure makes no difference. A limited company has the same obligations as a sole trader or partnership. Compliance requires three things:
Digital records kept in MTD-compatible software (paper records and standalone spreadsheets do not qualify); digital links between any systems you use, with no manual re-keying; and software submission of returns via HMRC’s API rather than the Government Gateway.
If your company is currently filing VAT returns by hand through the Government Gateway, that process needs to change.
Does a limited company need special MTD software?
No. Limited companies use the same MTD-compatible software as any other VAT-registered business. HMRC’s approved list includes full accounting packages that handle VAT, payroll and company accounts in one place, plus bridging software for businesses keeping spreadsheets.
Most limited companies already use some form of accounting software. If yours is on HMRC’s approved list with an active API connection, you may already be compliant. Look up your product by name on the HMRC list to confirm.
What is the current position for MTD for Corporation Tax?
MTD for Corporation Tax is not yet mandatory for any limited company. HMRC’s consultation closed in March 2021 and a summary of responses was published in November 2021. No mandatory implementation date has been announced since.
A voluntary pilot is running. The current corporation tax obligation remains as it is: file a CT600 within 12 months of your accounting period end and pay any CT due within 9 months and one day. No quarterly updates are required for corporation tax today.
MTD for Corporation Tax: what the rules will require
When MTD for Corporation Tax becomes mandatory, HMRC’s proposals require limited companies to keep digital records of income and expenses, submit quarterly updates through compatible software, and complete a final end-of-year return in place of the current CT600.
The quarterly model mirrors MTD for Income Tax: four summaries per year plus a year-end finalisation. Detailed technical guidance is subject to further consultation. No company should change its record-keeping in anticipation until a confirmed date is published.
What should directors do now?
1. Confirm your MTD for VAT position. If VAT-registered, check your software is on HMRC’s approved list. Non-compliance carries financial penalties. See our MTD thresholds guide.
2. Review your digital record-keeping. Limited companies must keep accounting records for at least six years. Moving to digital format now satisfies that duty and prepares you for MTD for CT.
3. Choose software that covers both VAT and Corporation Tax. Several packages on HMRC’s list support both VAT filing and company accounts, putting you ahead when MTD for CT is confirmed.
4. Monitor HMRC announcements. HMRC has committed to giving adequate notice. See our MTD changes guide for what’s currently known.