Making Tax Digital (MTD) is HMRC’s long-running programme to move tax from paper and website forms onto software. The idea is simple: keep records digitally, then submit them through a recognised product so HMRC receives structured data, not a retyped summary.
In practice MTD is three different stories — VAT, Income Tax, and Corporation Tax — and mixing them up is how directors get the wrong advice.
MTD for VAT (already live)
If you are VAT-registered, you must keep digital VAT records and file VAT returns using MTD-compatible software. That has been the default for VAT-registered businesses for years. You connect the software to HMRC, pull the period, send the nine boxes, and keep a digital audit trail.
- Do not file a VAT return by typing into the old online form if you are in MTD.
- Your software must store the figures digitally (spreadsheets can qualify if used correctly; most firms use dedicated products).
- Agent and business connections are different — accountants need the right HMRC authorisation.
MTD for Income Tax (rolling out)
Making Tax Digital for Income Tax Self Assessment (often called MTD ITSA) is rolling out from April 2026 for people with qualifying self-employment and/or property income above HMRC’s published thresholds (starting with higher incomes, then stepping down in later years). Those in scope keep digital records and send updates through software, not only a once-a-year SA100 typed by hand.
Company directors are not “in MTD for CT”. They may still be in MTD for Income Tax if they have a side trade or residential property income in their own name. Check GOV.UK for the current thresholds and start dates — HMRC has adjusted them before.
MTD for Corporation Tax (not going ahead)
HMRC consulted on Making Tax Digital for Corporation Tax years ago. In its July 2025 Transformation Roadmap it said it does not intend to introduce MTD for CT. Limited companies continue to file one annual Company Tax Return. What did change is the filing pipe: the free joint online service closed, so commercial CT software is now the normal route.
What “compatible software” means
HMRC publishes lists of software that can connect to its APIs. Compatible does not mean “any app with a PDF export”. It means the product can authenticate, send the right XML or API payload, and handle errors HMRC sends back. That is why practices standardise on a desk that already speaks VAT, CT and payroll rather than a patchwork of tools.
HydraTax is built around HMRC digital filing: MTD VAT returns, CT600 software filing, Self Assessment and PAYE RTI from one UK practice workspace.
How to prepare if you are a small company
- If VAT-registered: file every return through MTD software and keep the workings.
- If you have self-employment or property income: check whether MTD for Income Tax applies to you personally.
- For the company CT600: use commercial software and iXBRL accounts — do not wait for a “quarterly CT MTD” that is not coming.
- Keep bank records digital through the year so any MTD obligation is a submit step, not a reconstruction.