What is Making Tax Digital for Corporation Tax?

Making Tax Digital for Corporation Tax is part of HMRC’s long term plan to modernise the UK tax system by digitising record keeping and reporting. Under MTD for CT, companies will need to keep and maintain digital accounting records, file their Corporation Tax returns through compatible software, and communicate with HMRC entirely online.

The goal is to make the tax process more efficient, accurate, and transparent, reducing errors and improving the government’s ability to manage tax collection in real time.

Current status of Making Tax Digital for Corporation Tax

MTD for Corporation Tax is not yet mandatory. HMRC has stated that the system will not be introduced before April 2026, but many companies are already preparing.

A pilot programme is in progress, allowing selected businesses and software developers to test the system ahead of a full rollout. This pilot phase gives HMRC time to refine digital processes and identify potential challenges for companies of different sizes.

While no firm date for full implementation has been announced, it is expected that MTD for CT will follow the same staged approach as MTD for VAT and MTD for Income Tax.

What MTD for Corporation Tax will require

Once introduced, MTD for CT will change how limited companies maintain records and submit returns. The main requirements will include:

1. Digital record keeping

Companies will have to maintain all accounting records digitally using MTD compatible software. This means that invoices, receipts, and other financial data must be recorded electronically, with no manual spreadsheets or paper-based systems allowed unless they link directly to approved software.

2. Digital submission of Corporation Tax returns

Businesses will no longer submit their Corporation Tax return (CT600) through HMRC’s online portal or paper forms. Instead, they must send it directly through their digital accounting software, along with the accompanying accounts and computations.

This creates a fully digital link between business records and HMRC, reducing the risk of manual errors or data entry mistakes.

3. Quarterly updates to HMRC

Although final details are yet to be confirmed, it is expected that companies will have to provide quarterly updates on income and expenses to HMRC, similar to MTD for Income Tax. These updates will keep HMRC informed of a company’s tax position throughout the year, not just at year end.

4. Final end of period submission

At the end of the financial year, the company will confirm its final figures and submit a digital version of its Corporation Tax return and accounts. This will replace the traditional annual filing method.

Benefits of Making Tax Digital for Corporation Tax

MTD for CT is designed to create a more efficient tax process for both businesses and HMRC. The main benefits include:

• Fewer errors: Digital links reduce the risk of incorrect data entry or miscalculations.

• Greater transparency: Companies and HMRC will have a clearer picture of financial activity throughout the year.

• Time savings: Automation and software integration streamline record keeping and tax reporting.

• Better financial insight: Real time data helps businesses make informed decisions about profitability, cash flow, and tax planning.

• Reduced administrative burden: Once systems are set up, compliance becomes smoother and less reliant on manual paperwork.

Challenges for businesses

While MTD for CT brings advantages, it will also require companies to adapt their systems and processes. Common challenges include:

• Upgrading software: Businesses using spreadsheets or outdated accounting systems will need to switch to MTD compatible software.

• Training staff: Employees will need to understand new digital reporting requirements and software functions.

• Managing quarterly updates: Submitting data four times a year rather than once annually will increase the frequency of reporting.

• Ensuring data accuracy: Digital submissions mean HMRC will see errors more quickly, so companies must keep records up to date throughout the year.

An accountant can help overcome these challenges by managing digital systems, reviewing data, and ensuring compliance with MTD standards.

How accountants help with MTD for Corporation Tax

Accountants play a crucial role in helping businesses transition to Making Tax Digital. Their support includes:

• Advising on suitable MTD compatible accounting software.

• Setting up digital record keeping and ensuring data accuracy.

• Managing quarterly reporting and digital submissions.

• Reviewing tax computations to ensure compliance with HMRC requirements.

• Providing ongoing training and support for company staff.

They can also use real time financial data from digital systems to offer strategic tax planning, helping companies make the most of allowances and reliefs before the year end.

What companies can do to prepare now

Even though MTD for CT is not yet mandatory, preparing early will make the transition smoother. Businesses can take the following steps now:

1. Review your current accounting system – Check whether it can handle digital record keeping and submit returns electronically.

2. Adopt compatible software – Consider moving to cloud-based platforms such as Xero, QuickBooks, or Sage that already meet MTD standards for VAT.

3. Digitise financial records – Start recording transactions electronically and reduce reliance on manual spreadsheets.

4. Talk to your accountant – Get professional advice on how MTD for CT will affect your company’s reporting process.

5. Join the pilot programme – If eligible, consider joining HMRC’s pilot scheme to familiarise yourself with digital submissions ahead of time.

By acting now, your company can avoid last minute disruption and be fully compliant when MTD for Corporation Tax becomes mandatory.

Example in practice

A small manufacturing company currently files its Corporation Tax return through HMRC’s online portal once a year. To prepare for MTD for CT, its accountant moves the company’s bookkeeping to a cloud-based system that integrates directly with HMRC.

The company now records all transactions digitally, submits quarterly updates, and generates automatic reports. When MTD for CT launches, the company will already have a compliant system in place and minimal changes to make.

Conclusion

Making Tax Digital for Corporation Tax will represent a major step forward in digital compliance for UK companies. It will require businesses to keep all records electronically and submit returns directly through accounting software.

Although the new rules are not yet mandatory, preparing early by upgrading software and processes will save time, reduce stress, and ensure full compliance when the system goes live. With the guidance of an accountant, your business can make the transition smoothly and use digital tools to manage tax more efficiently in the years ahead.