Making Tax DigitalWhat UK Company Directors Need to Know (2026)
MTD for Corporation Tax is scrapped — but MTD for Income Tax may affect you personally. If you have rental income, freelance work, or short-term let income alongside your directorship, you could be in scope from April 2026.
It does not provide personalised financial advice and does not consider your full financial circumstances.
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MTD status for directors
Is your income structure optimised?
MTD means reviewing your tax position quarterly. Most directors have never modelled their salary, dividend and pension split across all three strategies.
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1. What Is Making Tax Digital?
Making Tax Digital is HMRC's programme to move tax record-keeping and submissions to digital software. The goal is to reduce errors, improve compliance, and give taxpayers a more real-time view of their tax position.
MTD has rolled out in phases:
| Phase | Who It Affects | When |
|---|---|---|
| MTD for VAT | All VAT-registered businesses | April 2019 / April 2022 |
| MTD for Income Tax | Self-employed & landlords above income thresholds | From April 2026 |
| MTD for Corporation Tax | Limited companies | Scrapped — not going ahead |
The scrapping of MTD for Corporation Tax was confirmed in HMRC's 2025 Transformation Roadmap. Limited companies will continue to file their CT600 annually in the usual way.
2. Does MTD Affect My Limited Company?
For your company: no change.
Your limited company continues to:
- File a CT600 Corporation Tax return annually
- Pay Corporation Tax nine months and one day after the accounting period ends
- Keep records in whatever format works for your business (though digital is best practice)
3. Does MTD Affect Me Personally as a Director?
This is where it gets more nuanced — and where many directors are caught off guard.
MTD for Income Tax applies to individuals, not companies. As a director, your company pays you a salary (PAYE) and dividends. These don't count towards the MTD threshold. However, if you have additional income sources outside your company, MTD may apply to you personally.
Income that counts towards the MTD threshold
Income that does NOT count
The thresholds
| When | Who Must Comply |
|---|---|
| April 2026 | Directors with qualifying income above £50,000 |
| April 2027 | Directors with qualifying income above £30,000 |
| April 2028 | Directors with qualifying income above £20,000 |
Qualifying income means your combined gross income from self-employment and/or property — before expenses.
4. Common Scenarios for Directors
Scenario A: Salary + Dividends Only
You pay yourself a director's salary and take dividends. No rental income, no freelance work.
MTD impact: None.
Your income sources don't meet the qualifying criteria. You continue with Self Assessment as normal.
Scenario B: Salary + Dividends + Rental Income
You own one or more buy-to-let properties in addition to running your company.
MTD impact: Potentially significant.
If your gross rental income (before expenses) exceeds the relevant threshold, you must comply with MTD from the applicable date.
Scenario C: Salary + Dividends + Freelance Work
You take on freelance or consultancy work outside your limited company as a sole trader.
MTD impact: Potentially significant.
Gross self-employment income counts towards the threshold.
Scenario D: Salary + Dividends + Short-Term Let / Airbnb
You let a property on a short-term basis via Airbnb or a similar platform.
MTD impact: Potentially significant.
Short-term let income is treated as property income and counts in full. Gross receipts — before any platform fees or expenses — are what HMRC measures.
Scenario E: Salary + Dividends + Partnership Income
You are a partner in a separate business partnership alongside your directorship.
MTD impact: None currently.
Partnership profits are excluded. Partnerships have been deferred from MTD with no mandation date announced.
Scenario F: Salary + Dividends + Rent-a-Room Income
You let a furnished room in your own home under the government's Rent a Room scheme.
MTD impact: None.
Rent-a-room income is excluded from MTD qualifying income calculations entirely.
Scenario G: Multiple Income Sources Combined
Qualifying income sources are combined when calculating the threshold.
Example: £28,000 UK rental income + £25,000 freelance income = £53,000 qualifying income — putting you in scope from April 2026.
Note: partnership income and rent-a-room income would not be added to this figure.
Now you know which scenario applies to you — see how your salary, dividend and pension split could be structured differently.
Explore the Director Income PlannerFor information purposes only. Not financial advice.
5. What Does MTD for Income Tax Actually Involve?
Digital record keeping
You must keep digital records of your qualifying income and expenses using HMRC-compatible software. Paper records are no longer sufficient.
Quarterly updates
You submit a summary of income and expenses to HMRC every quarter:
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
Quarterly updates are cumulative year-to-date figures — not four separate tax returns. Corrections can be made in the following quarter's update.
Year-end declaration
After your fourth quarterly update, you complete a final declaration confirming all income and claiming any reliefs. The deadline remains 31 January following the end of the tax year.
Penalties
A points-based system applies for late submissions. Each missed deadline earns one penalty point. Once you reach four points, a £200 fine is issued. Points reset after a defined period of full compliance.
6. How to Check If You're in Scope
Look at your 2024/25 Self Assessment return (filed by 31 January 2026).
Add together your gross income from:
- Self-employment (before expenses)
- UK property (before expenses)
Check against the thresholds:
- Above £50,000 → MTD from April 2026
- £30,000–£50,000 → MTD from April 2027
- £20,000–£30,000 → MTD from April 2028
- Below £20,000 → Not currently mandated
If you're in scope, identify and set up HMRC-compatible software before your start date.
7. Compatible Software
HMRC maintains an approved list of MTD-compatible software on GOV.UK, covering a range of options from full accounting packages to bridging software and simpler apps.
Before committing to any software, check that it supports MTD for Income Tax specifically — not just MTD for VAT — and that the year-end declaration (final declaration) functionality is available, as some providers are still developing this feature.
If you already use accounting software, check with your provider whether it is MTD-compatible and when full MTD Income Tax functionality will be available.
8. What MTD Means for Your Director Income Strategy
Here's the angle most guides miss: MTD doesn't just change how you report income — it changes how often you're looking at your tax position.
Moving from an annual Self Assessment to quarterly updates means directors with qualifying income will have a much clearer, more frequent picture of their tax position throughout the year. That makes it a natural moment to consider whether their salary, dividend and pension split still reflects their priorities.
For directors whose income sits entirely within their limited company (salary + dividends only), nothing changes on the MTD front. But the same principle applies — reviewing income structure at the start of each tax year is a common approach, rather than leaving it until filing time.
Director Income Planner
Automatically models three director income strategies — wealth maximisation, liquidity, and pension growth — based on your inputs. Switch between calculated outcomes and adjust manually to explore different scenarios. Full calculations include Corporation Tax, Employer NI, annual allowance taper, and the £100k personal allowance trap.
Explore the Director Income PlannerFor information purposes only. Not financial advice.
9. Key Dates at a Glance
| Date | What Happens |
|---|---|
| 6 April 2026 | MTD for Income Tax mandatory for qualifying income above £50,000 |
| 7 August 2026 | First quarterly update due (Q1 2026/27) |
| 6 April 2027 | MTD mandatory for qualifying income above £30,000 |
| 6 April 2028 | MTD mandatory for qualifying income above £20,000 |
| 31 January 2028 | First MTD year-end final declaration due (for tax year 2026/27) |
Frequently Asked Questions
Disclaimer
This content is for educational purposes only and does not constitute financial advice. Tax rules and allowances change regularly. Consider seeking regulated guidance for personalized advice on investment or pension decisions.
About the author
Melanie Reed is a fintech and product specialist with 13+ years' experience building mortgage, investment, savings and retirement tools at companies including Aviva, Lendinvest, Money Advice Trust and Luno. She develops calculators and content that simplify complex UK financial decisions, covering pensions, mortgages, tax-efficiency and long-term savings.
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