Making Tax Digital for Corporation Tax: What You Need to Know Now

Have you heard the news? HMRC announced a major change that could save your business a lot of hassle. Making Tax Digital for Corporation Tax, the digital overhaul many companies had been preparing for, has been completely scrapped. For UK limited companies, this means there is no longer a requirement for mandatory digital record-keeping or quarterly submissions specifically for Corporation Tax returns.

That said, this does not remove your obligations entirely. Accurate records and timely filing remain essential, and you still need to keep your accounts ready for HMRC inspection. The difference is that companies now have more flexibility in how they manage their records, giving directors and accountants the chance to focus on strategic business decisions rather than compliance checklists.

Why the Sudden Change?

Imagine training for a marathon only to find it cancelled at the start line. That is how many business owners and accountants feel following HMRC’s announcement on 6 January 2026. The agency explained that Corporation Tax involves complex calculations, group reliefs, and international transactions, which a rigid digital framework could not accommodate effectively. Back in 2025, HMRC’s Transformation Roadmap hinted at exploring alternatives, and now they have fully committed to scrapping the MTD plans for Corporation Tax.

This change applies to all companies, large and small. There is no need for MTD-compatible software solely for Corporation Tax, and there are no phased rollouts or digital tagging requirements to prepare for. Companies can continue using their current accounting systems without disruption.

The decision also aligns with lessons from the VAT rollout. Unlike Corporation Tax, VAT has been fully digital for most businesses since 2019. Corporation Tax, however, is more complex and involves calculations that vary widely between businesses. HMRC now plans a more tailored approach, possibly providing enhanced online tools, but without enforcing mandatory MTD. Regardless, good record-keeping is still essential for audits and accurate reporting.

What Remains on the Table with Making Tax Digital?

Even though MTD for Corporation Tax has been scrapped, other areas of tax compliance remain digital. VAT continues to be fully digital for businesses exceeding the £90,000 turnover threshold. Companies must still submit quarterly returns using compatible software, and penalties for non-compliance remain in force.

Income Tax Self Assessment is also moving into the digital era. From April 2026, sole traders and landlords with income over £50,000 from the 2024/25 tax year must maintain digital records, submit quarterly updates, and complete a final annual declaration by 31 January. These thresholds will drop to £30,000 in 2027 and £20,000 in 2028, gradually expanding the requirement to almost a million more taxpayers.

This is important for company directors who have personal income streams alongside their business. For example, if you own rental properties or freelance on the side, your limited company may avoid MTD for Corporation Tax, but your personal income will still fall under the new digital rules.

How This Impacts Your Day-to-Day Business

Let’s make this practical. If you are the director of an SME, you will continue filing Corporation Tax through standard CT600 forms. Before the announcement, companies worried about software upgrades and tagging every transaction digitally. Now, you can keep using your existing accounting systems, provided your records remain accurate and accessible. HMRC still expects timely returns, filed 12 months after your accounting period ends, and penalties for late filing remain unchanged.

Without MTD mandates, your business gains flexibility. You can optimise deductions for R&D credits, capital allowances, or other reliefs without worrying about software restrictions. Property investors, for instance, can continue claiming wear and tear allowances without forcing every receipt into a specific digital format. The key is to keep your records organised so that, if HMRC audits your accounts, everything reconciles clearly and efficiently.

HMRC still encourages digital engagement, however. Their Corporation Tax portal is evolving, with improved APIs and real-time queries becoming available. Linking payroll and VAT software voluntarily can reduce errors, save hours, and streamline your reporting. At Sterling & Wells, we have helped numerous UK firms implement these integrations, enhancing efficiency even without mandatory MTD compliance.

Opportunities in the New Landscape

This change is more than just a reprieve; it is an opportunity. Companies can now invest in smarter systems that improve operations without being bound by compliance checkboxes. AI-driven bookkeeping, integrated payroll and VAT platforms, and automated reconciliation tools are all options to future-proof your business.

Property companies are a prime example. With Corporation Tax off the MTD hook, directors can focus on Section 24 restrictions or ATED returns without being tied to rigid digital processes. Companies looking to expand can optimise group structures, claim maximum reliefs, and structure operations efficiently. The extra flexibility also allows businesses to review internal processes, improve reporting accuracy, and free up valuable time for strategic growth initiatives.

While some may worry that rules could change again, HMRC’s roadmap promises ongoing updates. Staying informed and partnering with professionals who have navigated every twist since the VAT MTD rollout ensures your company remains compliant and ready for future changes. Subscribing to Sterling & Wells’ newsletter delivers insights and actionable advice directly to your inbox.

Preparing Your Business for Success

Even without MTD for Corporation Tax, proactive steps pay dividends. Start by auditing your records: are they clear, organised, and easily accessible for HMRC? Test your accounting software against upcoming Income Tax rules if applicable. Train your staff on record-keeping best practices to reduce errors and ensure smooth submissions.

Sterling & Wells can support you across all areas, from Corporation Tax computations to full MTD VAT compliance. Our team helps clients save thousands in penalties while optimising their setup for growth. Filing with confidence, knowing every record is accurate and ready for inspection, is now simpler than ever.

As we move into 2026, this scrapping of MTD for Corporation Tax feels like a win, but tax compliance remains an ongoing responsibility. Contact Sterling & Wells today, whether through a call or online consultation, to make sure your business thrives in this new landscape. Peace of mind and operational efficiency start now.