How UK businesses can prepare for Making Tax Digital for corporation tax

If you've been tracking Making Tax Digital (MTD) for corporation tax and building it into your compliance plan, digital tax obligations still apply. MTD for VAT remains mandatory for all VAT-registered businesses, and CT filing rules took effect on 1 April 2026, requiring commercial software to file your Company Tax Return. HMRC's July 2025 Transformation Roadmap confirmed that the department doesn't intend to introduce MTD for Corporation Tax. The programme, first proposed in 2020, consulted on through 2021, and tentatively pencilled in for "2026 at the earliest," has been scrapped entirely.

This article is general guidance for UK finance teams working through what these changes mean in practice. Tax rules change, and specific obligations depend on your entity structure. Consult a qualified tax adviser before acting on anything covered here.

Why MTD for Corporation Tax was shelved, and what that means for your team

MTD for Corporation Tax was shelved because the proposals were never legislated, and respondents to HMRC's consultation said more clarity and much more lead time were needed before businesses could forecast costs or implement the change. For finance teams, that means the immediate MTD CT mandate has gone, but the practical work you did around software, workflows, and digital records still applies to live VAT and CT filing obligations.

The formal consultation ran from 12 November 2020 to 5 March 2021, drawing hundreds of responses from businesses, agents, and professional bodies. The proposals would've required digital records, periodic summary updates, and API-based filing for all entities within the charge to Corporation Tax. But they were never legislated and remained design proposals only.

The response summary, published in November 2021, highlighted two findings. The vast majority of respondents said further clarity was needed before accurate timescale or cost forecasts could be provided. Larger companies indicated they'd need two to five years' advance notice to agree funding, allocate resources, and acquire and test software.

If you earmarked budget for MTD CT software evaluation or started mapping quarterly workflows against the original consultation proposals, you aren't alone.

After the July 2025 Transformation Roadmap, HMRC said it doesn't intend to introduce MTD for Corporation Tax and will instead develop an approach to future CT administration suited to the varying needs of the corporate population.

What's changed for UK limited companies from April 2026

Some digital obligations tightened in April 2026. Knowing exactly which rules apply to your entity type is the difference between targeted compliance investment and wasted effort.

MTD for VAT still applies to limited companies

If your company is VAT-registered, Making Tax Digital rules generally require you to keep digital VAT records and submit VAT returns through MTD-compatible software. This includes the digital links requirement: once data has been entered into software, any further transfer between systems must be automated, not manually re-keyed. VAT compliance remains the base requirement in your digital tax setup.

Commercial software is now required for limited-company CT filing

From 1 April 2026, you need to use commercial software to file your annual accounts and Company Tax Return with HMRC, per the filing service closure. The free HMRC/Companies House joint filing service has closed. A complete submission comprises your CT600 return form, a Corporation Tax computation in inline eXtensible Business Reporting Language (iXBRL) format, and company accounts in iXBRL format.

Annual CT filing requirements should be confirmed directly against current HMRC guidance. If you were relying on the free service, you need compatible software in place now.

MTD for Income Tax Self Assessment does not apply to limited companies

MTD for ITSA became mandatory from 6 April 2026 for sole traders and landlords with qualifying income over £50,000. This is a separate programme with its own quarterly submission requirements and points-based penalty system. Limited companies fall outside MTD for Income Tax Self Assessment (ITSA), and MTD for Corporation Tax has been scrapped entirely. The distinction matters because some guidance conflates the two programmes or still presents MTD for CT as a live obligation.

It’s an important time to ask: are you confident that everyone on your finance team understands which obligations apply to your specific entity structure?

CT late-filing penalties are now higher for limited companies

Even without MTD CT, the existing CT penalty system has tightened. Increased fixed penalties were legislated through Finance Bill 2025-26 for returns with a filing date on or after 1 April 2026. The ACCA confirmed the changes align with the Budget 2025 rationale that current penalties had fallen to roughly half their original real-terms value.

Percentage-based penalties at six and twelve months (10% of unpaid tax each) remain unchanged. The doubled fixed penalties make your software choice and data quality more consequential than before.

What MTD for VAT taught finance teams about digital compliance

MTD for VAT is the clearest record of how HMRC executes a digital tax programme, and the lessons carry direct implications for how you approach digital record-keeping today.

Costs consistently exceeded official estimates

Programme costs ballooned beyond initial projections, according to a National Audit Office (NAO) progress report. At the business level, actual transition costs significantly exceeded HMRC's estimate of £109 per VAT-registered business. A practitioner survey by the Association of Taxation Technicians (ATT) and the Chartered Institute of Taxation (CIOT), reported by AccountingWEB, found that a majority of respondents spent considerably more. If you went through that transition, the gap between the official estimate and your actual bill probably wasn't a surprise.

Digitalisation alone didn't reduce errors

That same ATT/CIOT survey found that 90% of respondents said MTD hadn't made tax easier for agents and businesses, and 70% had seen no reduction in accounting errors. An ICAEW analysis offers a useful reconciliation: the stumbling blocks were "more around change management challenges rather than technology." Businesses that redesigned processes around digital workflows saw benefits. Those that simply digitised existing manual processes didn't.

Better data quality and fewer errors depend on process redesign as much as the tools you choose.

Digital links caused the most operational disruption

For CT, data flows from your accounting ledger through tax adjustment workings, often in spreadsheets that only one person on the team fully understands, to the CT600 and iXBRL-tagged accounts. Each manual transfer point would've been a digital links failure under any future MTD CT system. Tools that automate data capture at the point of transaction can eliminate manual transfer points before data ever reaches your tax workings. Mapping those transfer points now supports a better month-end close regardless of what HMRC does next.

How to choose CT-compatible software for your business

The key compliance reference for CT filing is HMRC's list of commercial CT software suppliers, last updated 1 April 2026. Software on this list has provided evidence that it can produce one or more elements of a Company Tax Return.

Key platforms compared

Some absences may surprise you. If you use an accounting platform as your primary finance system, you'll likely need a separate, HMRC-listed tool for CT filing. Similarly, if your enterprise resource planning (ERP) system isn't on the list, you'll need a specialist CT tool with data fed from your ERP as a digital link. Xero Tax is primarily designed for accountancy practices, so if your in-house team files directly, confirm direct-use licensing before committing.

Selection criteria that matter

Before signing a contract or renewal, check four things. First, verify the software appears on HMRC's CT suppliers list and covers both iXBRL Accounts and iXBRL Computations. Second, confirm whether it's practice-facing or designed for in-house use. Third, assess whether your ERP-to-CT-tool data transfer constitutes a digital link under ICAEW guidance. Fourth, discuss software choice with your external accountant, since their practice software stack often governs the filing tool in practice.

Why improving your data flows now still makes sense

Investing in data quality is harder to justify without a confirmed mandate date. Two practical reasons still support acting now.

Data quality degrades slowly, then fails suddenly

Corporation tax computations involve data structures materially more complex than VAT returns: group relief, iXBRL-tagged accounts, transfer pricing adjustments, multi-entity consolidations. Your own data quality issues are easier to fix now, at your own pace.

Consider reviewing your chart of accounts against HMRC's expected CT data categories: trading income, non-trading income, capital allowance pools, disallowable expenditure. Miscellaneous or sundry nominal codes that aggregate transactions needing separate classification for tax purposes create avoidable problems at year-end and are easier to fix proactively. You probably already know which codes are the problem.

How many manual transfer points sit between your accounting ledger and your CT600 today?

Clean spend data feeds better CT computations

The quality of your corporation tax computation depends on the data flowing into it. Every expense claim with a missing receipt, an incorrect VAT code, or an ambiguous category creates downstream work during tax preparation, and that work almost always lands on the same two or three people.

Spendesk is an all-in-one spend management platform that consolidates company cards, expense management, accounts payable, procurement, and budgeting. For finance teams preparing CT computations, the value is cleaner records at the point of transaction. The platform captures transactions with OCR-based receipt management and automated VAT coding. According to Spendesk, this can deliver up to an 80% reduction in manual data entry. Native integrations with accounting software and ERP systems support automated data links between source transactions and your general ledger, reducing manual transfer points and cutting some of the cleanup work that otherwise lands on finance teams at year-end.

Redirecting your compliance effort toward what matters now

The scrapping of MTD CT removes an immediate compliance deadline, but it doesn't make the preparation you did irrelevant. If you earmarked budget for digital record-keeping improvements when MTD CT looked imminent, that same investment applies directly to the obligations already in force.

The steps worth taking now still serve you whether MTD CT returns in two years or five. Auditing your data flows from source transaction to CT filing software helps you identify every manual transfer point, and those points are the likeliest failure mode under any future mandate. Verifying your CT filing software still appears on HMRC's list of commercial suppliers avoids a last-minute scramble if you need to change tools. And reviewing whether your chart of accounts maps cleanly to CT data categories reduces year-end tax adjustment work regardless of what HMRC does next.

HMRC's interest in digital administration hasn't disappeared. The businesses that benefited most from MTD for VAT were those that treated the mandate as a prompt to redesign processes, not just digitise them. The same principle will apply whenever HMRC turns its attention back to corporation tax. In the meantime, redirecting effort into live VAT compliance, filing software, and data-quality improvements gives your team a clearer operational outcome: fewer manual handoffs, lower filing risk, and less wasted work at year-end.

See how Spendesk's accounting automation supports cleaner data for CT filing.

Frequently asked questions about Making Tax Digital for corporation tax

Is Making Tax Digital for Corporation Tax still happening?

No. HMRC's July 2025 Transformation Roadmap confirmed that the department doesn't intend to introduce MTD for Corporation Tax. The programme was consulted on between 2020 and 2021 but was never legislated, and HMRC has since indicated it will develop a different approach to digital CT administration.

Do I need commercial software to file my Company Tax Return?

Yes. From 1 April 2026, you need to use commercial software to file your annual accounts and Company Tax Return. The free HMRC/Companies House joint filing service has closed. Check HMRC's list of commercial CT software suppliers to confirm your chosen tool is approved.

Does MTD for Income Tax Self Assessment apply to limited companies?

No. MTD for ITSA applies to sole traders and landlords with qualifying income over £50,000 from 6 April 2026. Limited companies fall outside this programme entirely, and MTD for Corporation Tax has been scrapped. Some guidance conflates the two, so check which obligations apply to your specific entity structure.

Have CT late-filing penalties changed?

Yes. Fixed penalties doubled for returns with a filing date on or after 1 April 2026. A late return now attracts a £200 penalty (previously £100), and three successive late filings carry a £1,000 penalty (previously £500). Percentage-based penalties at six and twelve months remain unchanged at 10% of unpaid tax.

Should I still invest in digital record-keeping for corporation tax?

Yes. Even without a confirmed MTD CT mandate, the practical benefits of clean, well-structured data remain. Better source data reduces year-end tax adjustment work, supports the digital links requirement already live under MTD for VAT, and positions your finance team to respond faster if HMRC revisits corporation tax digitalisation.