Making Tax Digital (MTD) is the biggest change to UK tax reporting in decades. From 6 April 2026, hundreds of thousands of self-employed individuals and landlords will need to submit quarterly digital updates to HMRC — replacing the familiar annual Self Assessment return with a new, more frequent reporting cycle.
For company directors, the picture is nuanced. MTD for Income Tax doesn't apply to your limited company directly, but it may well apply to you personally if you have other income sources. Here's what you need to understand.
What Is Making Tax Digital?
Making Tax Digital is HMRC's initiative to modernise the UK tax system. The core requirements are straightforward: keep digital records using compatible software, and submit summaries of your income and expenses to HMRC every quarter instead of once a year.
MTD for VAT has been mandatory since 2022 for all VAT-registered businesses. The next phase — MTD for Income Tax Self Assessment (MTD for ITSA) — begins in April 2026 and affects individuals with self-employment or property income above certain thresholds.
Does MTD Apply to Limited Company Directors?
Your limited company itself is not affected by MTD for Income Tax. Corporation Tax has its own reporting requirements, and while HMRC has signalled that MTD for Corporation Tax is coming eventually, there's no confirmed date yet.
However, you personally may be affected if you have income from:
Self-employment — If you run a sole trader business alongside your limited company
Property rental — If you own buy-to-let properties or receive rental income from any UK or overseas property
Multiple income sources — If your combined self-employment and property income exceeds the threshold
Crucially, your salary and dividends from your limited company do not count towards the MTD threshold. Those are reported through PAYE and your Self Assessment return as normal.
The MTD Thresholds and Timeline
Date | Who's Affected |
|---|---|
6 April 2026 | Self-employed/landlords with gross income over £50,000 |
April 2027 | Threshold drops to £30,000 |
April 2028 | Threshold drops to £20,000 |
These thresholds are based on gross income (turnover), not profit. If your rental properties generate £52,000 in rent before expenses, you're in scope from April 2026 — even if your net profit is much lower.
⚠️ Important: HMRC will assess your eligibility based on your 2024/25 Self Assessment return (due 31 January 2026). If your combined self-employment and property income exceeds £50,000, you'll receive a letter confirming you need to join MTD.
What Quarterly Reporting Actually Means
Under MTD, you'll need to submit four quarterly updates each year, plus a final declaration. Here's the reporting calendar for the 2026/27 tax year:
Quarter | Period | Deadline |
|---|---|---|
Q1 | 6 April – 5 July 2026 | 7 August 2026 |
Q2 | 6 July – 5 October 2026 | 7 November 2026 |
Q3 | 6 October – 5 January 2027 | 7 February 2027 |
Q4 | 6 January – 5 April 2027 | 7 May 2027 |
Final Declaration | Full tax year | 31 January 2028 |
The quarterly updates are not full tax returns. They're simply summaries of income and expenses for the period — think of them as progress reports. The final declaration at year-end is where you bring everything together, add any adjustments, and calculate your actual tax liability.
What Software Do You Need?
You'll need HMRC-compatible software that can keep digital records and submit quarterly updates directly to HMRC. Spreadsheets alone won't work unless combined with "bridging software" that can transmit the data.
Popular options include FreeAgent, Xero, QuickBooks, and Sage — many of which you may already use for your limited company accounts. If you bank with NatWest, Royal Bank of Scotland, Mettle, or Ulster Bank NI, you can access FreeAgent for freeStart Your Free Trial →
Penalties for Non-Compliance
HMRC is introducing a points-based penalty system for MTD. Each late quarterly submission earns one penalty point. Once you reach four points, you'll receive a £200 fine — and additional penalties for each subsequent late submission.
There's some good news: for the first 12 months (from April 2026), HMRC won't apply penalty points for late quarterly updates. This gives you a grace period to get used to the new system. However, the final declaration deadline of 31 January still carries the usual late filing penalties.
How Directors Should Prepare
Action Checklist
Review your 2024/25 income — do you have self-employment or property income over £50,000?
Wait for HMRC's letter after submitting your January 2026 Self Assessment
Choose MTD-compatible software and start using it now for practice
Set up digital record-keeping for all self-employment and rental income
Consider whether your accountant will handle quarterly submissions
Align your property accounting to calendar quarters if it makes admin easier
The Silver Lining
Yes, quarterly reporting means more frequent engagement with your tax affairs. But there are genuine benefits: you'll have a clearer picture of your tax position throughout the year, no last-minute scramble for receipts in January, and your accountant can spot issues early rather than discovering problems at year-end.
For directors who already maintain good financial records, MTD shouldn't be a major burden — it's essentially formalising what good practice already looks like.
Frequently Asked Questions
Does MTD apply to my limited company?
Not yet. MTD for Corporation Tax hasn't been introduced. The current MTD for Income Tax rules apply to you personally if you have self-employment or property income above the threshold.
Do dividends from my company count towards the MTD threshold?
No. Dividends and salary from your limited company are not included. Only self-employment turnover and property rental income count.
What if I miss a quarterly deadline?
For the first 12 months, you won't receive penalty points. After that, each late submission adds a point. At four points, you'll receive a £200 penalty.
Can my accountant submit quarterly updates for me?
Yes. Many accountants offer MTD submission as part of their service. However, you'll still need to maintain digital records and provide the information promptly.
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