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What is Making Tax Digital for Corporation Tax? Has it been scrapped, and what does this mean for your business?

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Worried you’ve fallen behind on Making Tax Digital for corporation tax? You can stop worrying—HMRC officially scrapped the entire initiative in July 2025.

If you run a limited company, this means you won’t face new digital record-keeping requirements or quarterly reporting for your corporation tax returns. We’ll walk you through what happened, why HMRC reversed course, and what this policy shift means for your business going forward.

This is a complete policy reversal, not just a delay. Thousands of UK businesses were preparing for change—some had already started evaluating software or setting aside budget. Now you can put those plans on hold.

Here’s what we discuss in this article:

What is MTD for corporation tax and why was it scrapped?

HMRC has confirmed it will not introduce Making Tax Digital for corporation tax. This means limited companies can continue using their current systems to file annual Company Tax Returns (the CT600 form). You won’t be required to keep digital records or submit quarterly updates through MTD-compatible software for corporation tax purposes.

HMRC shared the news in their July 2025 Transformation Roadmap. Instead of a one-size-fits-all approach, HMRC plans to work with stakeholders to develop a future administration of corporation tax that better suits the diverse range of companies—from small businesses to multinationals.

Background of MTD for corporation tax

Making Tax Digital for corporation tax was first proposed around 2020 as part of HMRC’s broader digital transformation programme. The original plan aimed to require companies to maintain digital records and submit quarterly updates of their income and expenses, similar to what’s already in place for VAT-registered businesses.

HMRC’s goal was to modernise tax administration, reduce errors, and close the tax gap. The initiative had already been rolled out successfully for VAT, and MTD for Income Tax Self Assessment was being phased in for sole traders and landlords.

Corporation tax was next in line for digital transformation. But companies come in all shapes and sizes – from small startups to global giants. One digital solution just wasn’t going to work for everyone.

Official statement from HMRC

In its July 2025 Transformation Roadmap, HMRC stated clearly: “HMRC do not intend to introduce MTD for CT…” This wasn’t a postponement or a revision – it was a full cancellation.

The roadmap explained that HMRC is shifting its focus to internal system upgrades and digital-first initiatives that can benefit all taxpayers. Rather than forcing all companies into quarterly digital reporting, HMRC wants to develop more tailored solutions that account for different business sizes and structures.

Primary reasons for cancellation

HMRC scrapped MTD for corporation tax for several practical reasons:

• Complexity of the corporation tax population: Limited companies range from one-person consultancies to FTSE 100 giants. A quarterly reporting system that works for a small family business might be completely inappropriate for a multinational with dozens of subsidiaries.
• Resource and capacity constraints: HMRC’s own systems needed significant upgrades before they could handle quarterly corporation tax submissions from hundreds of thousands of companies.
• Feedback from consultation: Tax professionals, accountants, and business groups raised serious concerns during the 2020 consultation. Many argued the costs and administrative burden would outweigh the benefits, especially for smaller companies.

Ultimately, HMRC decided the effort and expense of rolling out MTD for corporation tax would be disproportionate to the likely benefits. Instead, resources will be directed toward initiatives that can deliver value across the entire tax system.

What does this mean for your business?

The cancellation affects businesses differently depending on their size, structure, and how far they had progressed with MTD preparations. If you run a limited company, you won’t be forced to adopt new software or change your tax processes for corporation tax purposes.

However, it’s worth understanding how this decision impacts different types of businesses. Some companies had already invested time and money getting ready.

Sole traders and micro-entities

Sole traders aren’t subject to corporation tax – they pay income tax on their profits instead. This means MTD for corporation tax was never relevant to you in the first place.

However, if you’re a sole trader with qualifying income over £50,000, you must use MTD for Income Tax (which was introduced in April 2026). This will require you to keep digital records and submit quarterly updates through compatible software.

Micro-entities operating as limited companies are the real winners here. Many of you were worried about the cost and complexity of quarterly reporting when your businesses are quite simple. You can now pause any MTD corporation tax preparations and focus your resources elsewhere.

Small and medium businesses

SMEs operating as limited companies were the primary target audience for MTD for corporation tax. Many of you had started evaluating software options, attending webinars, or consulting with your accountants about compliance.

The cancellation means you can redirect those resources. If you’d budgeted for new accounting software specifically for MTD corporation tax, you might repurpose that investment for other business priorities – perhaps marketing, equipment, or staff training.

That said, digital record-keeping remains beneficial even without a mandate. Modern accounting software helps you track income and expenses in real time, collaborate with your accountant more easily, and get better insights into your financial health. The cancellation doesn’t mean you shouldn’t consider digital tools – it just means you’re free to choose what works best for you without regulatory pressure.

Larger enterprises

Larger companies often already use sophisticated accounting systems and were less concerned about MTD for corporation tax compliance. Your finance teams were likely confident they could handle quarterly reporting without major disruption.

However, many of you had allocated budget and project resources to prepare for the change. You might have been planning system upgrades, staff training, or process redesigns. Now you can repurpose those resources for other digital initiatives, perhaps improving your management reporting, enhancing cybersecurity, or exploring automation in other areas of the business.

Key considerations for limited companies

Limited companies are the legal structure most affected by this cancellation, since corporation tax applies specifically to them. While MTD for corporation tax won’t be introduced, there are still important points to consider for your tax compliance and business planning.

Will there be mandatory changes later?

This is the question we hear most: could HMRC reintroduce MTD for corporation tax in the future? Based on the July 2025 roadmap, there are no current plans to bring it back. HMRC was quite definitive in its language – this wasn’t framed as a delay or postponement.

However, digital transformation remains a priority for HMRC. The tax authority is committed to modernising how it interacts with taxpayers and how it administers the tax system.

This means we might see different approaches to corporation tax in the years ahead, perhaps more targeted reforms for specific segments of the corporate population rather than a blanket MTD mandate. Subscribe to HMRC updates, follow trusted accounting and tax advisory sources, and check in with your accountant periodically to stay informed.

Keeping digital tools relevant

Even without an MTD mandate, digital accounting tools offer significant advantages for limited companies. Modern cloud-based software gives you real-time visibility into your finances, making it easier to track cash flow, manage invoices, and plan for tax payments.

Digital tools also simplify collaboration with your accountant or bookkeeper. Instead of exchanging spreadsheets by email or dropping off shoeboxes of receipts, you can both access the same up-to-date records at any time.

Many businesses find that software like Sage helps them stay organised and compliant without the stress. You can automate routine tasks like invoice reminders and bank reconciliations, freeing up time to focus on growing your business.

How to future-proof your tax compliance

Even though MTD for corporation tax is cancelled, the broader Making Tax Digital programme continues. HMRC remains committed to digital transformation, and other parts of MTD are already in effect or coming soon.

Being proactive now will help you stay ahead of compliance changes. Here’s what you can do to prepare.

Keeping track of MTD for VAT and income tax

MTD for VAT has been mandatory since April 2019 for VAT-registered businesses with turnover above the VAT threshold (currently £90,000). If you’re VAT-registered, you’re already keeping digital records and submitting returns through compatible software.

MTD for Income Tax Self Assessment is rolling out in phases for sole traders and landlords:

Start Date	Who It Applies To
April 2026	Sole traders and landlords with qualifying income over £50,000
April 2027	Sole traders and landlords with qualifying income over £30,000
April 2028	Sole traders and landlords with qualifying income over £20,000

If you operate as a limited company, MTD for Income Tax won’t affect you for corporation tax purposes. However, if you also have sole trader income or rental property income as an individual, you might fall under MTD for Income Tax.

Ensuring robust record-keeping

Good record-keeping is essential regardless of MTD mandates. Digital records reduce errors, make tax filing easier, and give you better control over your finances.

HMRC expects businesses to maintain accurate records for at least six years. This includes invoices, receipts, bank statements, and details of income and expenses.

Using cloud-based accounting software ensures your records are secure, backed up, and accessible from anywhere. You won’t have to worry about losing paper receipts or dealing with crashed hard drives.

Preparing for future HMRC updates

HMRC’s digital transformation isn’t standing still. While MTD for corporation tax is off the table, other changes are on the horizon.

Staying informed helps you avoid last-minute scrambles when new requirements are announced. HMRC offers free email alerts for different tax topics – you can sign up on the GOV.UK website to receive news about changes that affect your business. Professional bodies like the Association of Taxation Technicians (ATT) and the Institute of Chartered Accountants in England and Wales (ICAEW) publish regular updates and guidance. We at Sage will also continue to keep our readers updated, subscribe to the Sage Advice blog to make sure you’re the first to get those latest updates.

Where is Making Tax Digital headed?

While MTD for corporation tax is off the table, HMRC’s broader digital transformation continues. The tax authority is pursuing several initiatives aimed at making tax administration simpler, more efficient, and more accurate for everyone.

Expanding digital transformation

HMRC’s July 2025 Transformation Roadmap outlined several key priorities beyond MTD:

• AI-powered tools: HMRC is developing artificial intelligence tools to help taxpayers understand their obligations, reduce errors, and get faster responses to queries.
• GOV.UK One Login: This initiative will create a single login for all government services, making it easier to access HMRC, Companies House, and other agencies without managing multiple accounts.
• E-Invoicing: HMRC is exploring e-invoicing requirements aligned with international standards. This could eventually require businesses to issue and receive invoices in a standardised digital format, though no firm timeline has been set.

Considering other HMRC initiatives

Beyond MTD, there are other compliance areas worth watching. Changes to R&D tax credits mean HMRC has tightened the rules around research and development tax relief to combat abuse. Updates to payroll and PAYE reporting continue to evolve—Real-Time Information (RTI) for payroll is already in place, but HMRC continues to refine reporting requirements.

International tax reforms like the OECD’s Pillar Two rules introduce a global minimum corporation tax rate for large multinationals. If your business operates internationally, consult with your tax advisor about how the rules might affect you.

Next steps for your business strategy

The cancellation of MTD for corporation tax gives you breathing room, but it’s still worth taking action to strengthen your digital tax compliance. Here are practical steps you can take now:

• Review your current software to check whether it meets your operational needs
• Focus on digital record-keeping even without an MTD mandate
• Stay informed by subscribing to HMRC updates and consulting with your accountant regularly
• Leverage existing tools if you’re already using software for VAT or payroll

Digital transformation is an ongoing journey, and businesses that embrace it now will be better positioned for the future. Discover how making tax digital tools can simplify your compliance and give you more time to focus on growing your business.

Frequently asked questions about MTD for corporation tax