Making Tax Digital (MTD) has already changed how UK businesses manage their tax obligations, and limited companies are next in line for further transformation.
If you’re running a limited company, it’s crucial to understand what MTD means for you in 2025 and how to get ahead of upcoming changes.
In this article, we break down the current requirements, what’s coming next, and how your company can prepare effectively.
Where Are We Now with MTD?
MTD for VAT
If your limited company is VAT-registered (earning over £85,000 annually), you’re already required to:
- Keep digital records of your VAT transactions
- Submit VAT returns through MTD-compatible software
Even if you voluntarily registered for VAT under the threshold, the MTD rules still apply to you.
MTD for Income Tax
This does not apply to limited companies.
It is only relevant for sole traders and landlords.
It’s still important to learn ways you can reduce your tax bill as a company director.
Download our free Taxes Made Simple guide which breaks down all you need to know about taxes as a UK business owner, not just VAT.
What’s Next: MTD for Corporation Tax
HMRC is planning to introduce MTD for Corporation Tax (CT) but it’s not mandatory in 2025.
However, it is currently in the consultation and pilot stages, with a potential go-live date from April 2026 at the earliest.
Under this new phase:
- Companies will need to keep digital accounting records
- Corporation tax returns will be submitted via MTD-compatible software
While details are still emerging, 2025 is the ideal time to prepare by reviewing your current systems and understanding the expected changes.
What Will MTD for Corporation Tax Likely Involve?
Although not yet finalised, here’s what limited companies should expect:
- Digital record keeping: No more paper-based records or manual spreadsheets
- Quarterly submissions: Similar to MTD for Income Tax, companies may need to submit more regular updates to HMRC
- Final CT return submission: Through MTD-compliant software instead of traditional online forms
It’s about making tax digital by default, not just at year-end.
At Legacy Figures Accountancy, we specialise in managing your business finances with you.
Want to learn more? Let’s have a chat.
How Should Limited Companies Prepare in 2025?
Here’s how to stay one step ahead:
1. Review Your Current Systems
Are you already using accounting software like Xero, QuickBooks, or Sage?
If not, now is the time to move away from spreadsheets and embrace digital tools.
2. Switch to MTD-Compatible Software
Choosing a recognised software that’s already compatible with MTD for VAT will make future transitions smoother.
Leading platforms like Xero, Quickbooks and Sage are good options.
Plus, they will likely support CT filings too when the time comes.
3. Digital Bookkeeping
Start keeping all income, expenses, invoices, and receipts in a digital format.
Many cloud systems allow you to upload and categorise records in real-time.
4. Stay Informed
MTD for Corporation Tax is evolving.
Keep an eye on HMRC’s announcements or subscribe to bookkeeping newsletters (like ours) to stay in the know.
5. Work with a Bookkeeper or Accountant
They can guide you through MTD requirements, help implement new systems, and reduce your admin burden so you can focus on running your business.
MTD FAQs from Limited Company Directors
Do I have to do anything in 2025?
If you’re VAT-registered, you must already comply with MTD for VAT.
MTD for Corporation Tax is not mandatory yet, but preparing now is wise.
Will MTD mean more admin for my company?
Initially, yes.
But with the right software and support, it can also streamline your processes and improve accuracy.
Can I still use spreadsheets?
Technically yes, if they are digitally linked to bridging software.
But long term, fully digital systems are far more efficient and compliant.
Final Thoughts: What’s Best for You and Your Business?
Making Tax Digital is transforming the way UK businesses handle their finances.
For limited companies, 2025 is a year to solidify MTD for VAT compliance and lay the groundwork for Corporation Tax changes ahead.
By upgrading your systems and working with a trusted bookkeeper, you can avoid last-minute scrambles and run your business with greater confidence and clarity.
👉 Get in touch today for a friendly, no-obligation chat.
