Is Your Limited Company Ready for Making Tax Digital?

July 17, 2025

Making Tax Digital (MTD) is HMRC’s long‑term plan to move tax administration online. It’s designed to reduce errors, improve efficiency, and give businesses a clearer, more up‑to‑date view of their finances.

If you run a limited company in the UK, here’s what you need to know in 2025.

What is MTD?

MTD requires businesses to:

Keep digital records of income and expenses.
Use MTD‑compatible software to submit returns directly to HMRC.

How Does MTD Affect Limited Companies?

1. MTD for VAT

If your limited company is VAT‑registered and has turnover above £90,000 (2024/25 threshold), you must keep digital records and submit VAT returns through MTD‑compatible software.
This rule has been in place since April 2019, and there’s no exemption based on company size (unless you successfully apply for a specific exemption on digital grounds).

2. MTD for Corporation Tax (Coming Soon)

HMRC is developing MTD for Corporation Tax.
It’s currently in the pilot phase and will not start before April 2026.
Once live, limited companies will need to:
Keep digital accounting records.
Submit corporation tax information to HMRC using compatible software.
Likely send quarterly updates instead of just one annual return.

Final details will be confirmed closer to rollout.

3. Quarterly Updates & More Frequent Reporting

For VAT, you already submit returns quarterly (or sometimes monthly).
When MTD for Corporation Tax begins, you’ll likely have to submit information more often than the current once‑a‑year process.

What Should Limited Companies Do Now?

Check your software – Make sure your accounting system (e.g. Xero, Sage, QuickBooks) is MTD‑ready.
Keep everything digital – Paper records won’t meet requirements; store invoices and receipts digitally.
Get your team ready – Anyone handling accounts should understand how to use MTD‑compatible software.
Stay informed – Keep an eye on HMRC updates about MTD for Corporation Tax so you can prepare early.
Work with your accountant – A proactive accountant can make sure you’re compliant and avoid late‑filing penalties.

Benefits for Limited Companies

Although MTD might feel like extra admin, there are big advantages:

Less room for manual errors.
Clearer cashflow tracking throughout the year.
Easier to plan and set aside funds for tax.
Streamlined processes with cloud accounting.

Final Thoughts

Making Tax Digital is here to stay.
For VAT‑registered limited companies, it’s already part of daily operations. For corporation tax, it’s just around the corner—so taking steps now means fewer headaches later. Need help making your company fully MTD ready? Talk to your accountant or a tax advisor to make sure your systems and processes are in place.