MTD Income Tax applies to sole traders and landlords, not limited companies. But if you are a company director, MTD already affects you through MTD VAT — and the rules for companies may change. Here is what you need to know.
MTD Income Tax — does it apply to limited companies?
No. The April 2026 MTD Income Tax mandate applies to individuals with qualifying self-employment or property income. Limited companies pay corporation tax, not income tax, and are not in scope.
However, if you are a company director who also takes a salary or dividends and files a Self Assessment return, your personal income from self-employment (if any) could still be in scope.
MTD VAT — does it apply to limited companies?
Yes. MTD VAT has applied to VAT-registered businesses since 2019. If your limited company is VAT-registered (or voluntarily registered), you must already be:
- Using MTD-compatible software to submit VAT returns.
- Keeping digital records of your VAT transactions.
- Submitting VAT returns via the MTD API, not the gov.uk portal.
If your limited company is not VAT-registered, MTD VAT does not apply — but you still need to file company accounts and corporation tax returns to Companies House and HMRC.
Best software for limited companies
Xero — best for growing limited companies
Xero handles MTD VAT, corporation tax, and company accounts in one platform. Its 1,000+ integrations include payroll (via Gusto), expense management, and multi-currency. Xero Grow at £33/month is the most popular tier for limited companies.
Sage — best for established companies needing payroll
Sage is the most established UK accounting brand and is particularly strong for companies that need built-in payroll. Sage Accounting Plus at £36/month includes payroll features that Xero requires third-party add-ons for.
What about corporation tax?
Corporation tax is not part of MTD. You still file your corporation tax return (CT600) and company accounts to Companies House separately. HMRC has not announced plans to bring corporation tax into MTD, but it is widely expected to be the next phase after MTD Income Tax is fully rolled out.
Key takeaway
If you run a limited company, MTD Income Tax does not apply to your company. But MTD VAT almost certainly does if you are VAT-registered. Use HMRC-recognised software that handles both VAT and company bookkeeping — Xero and Sage are the strongest options.