Making Tax Digital for Corporation Tax Changes: What This Means for Businesses

On the 21st July 2025, HMRC announced in its latest Transformation Roadmap that it will no longer proceed with Making Tax Digital (MTD) for Corporation Tax (CT). HMRC stated that instead of this, they are “developing an approach to the future administration of CT that is suited to the varying needs of the diverse CT population”.

In this blog, we’ll look at what these MTD for Corporation Tax changes mean for small and medium businesses, why this decision was made, and what businesses should do next.

What is MTD for Corporation Tax?

Making Tax Digital is an HMRC-led government initiative that aims to move UK taxpayers' records away from paper and spreadsheets to a fully digital system. This scheme aims to make the tax administration more efficient and easier for taxpayers by:

• Requiring businesses and individuals to keep digital records

• Using compatible software to submit tax information

• Replacing more traditional and manual processes, such as paper receipts 

MTD is being rolled out in phases, targeting different types of tax, such as MTD for VAT-registered businesses (already rolled out), MTD for income tax (IT), and the recently abolished MTD for CT.

Why was MTD for CT scrapped?

There are several reasons behind the decision to scrap MTD for CT. In general, there has been little movement on this. MTD for IT was prioritised, and the delays of this gradually pushed MTD for CT down the priority list.

Based on the HMRC transformation roadmap, commentary and industry feedback, there are a few different reasons that this has been scrapped. The ‘one-size-fits-all’ approach to digital reporting could be too rigid across this spectrum, as those who pay corporation tax range from one-person startups to global businesses.

Additionally, it appears that the burden of rolling this out would outweigh the advantages, and alternative compliance methods, such as smarter, targeted tools, would be preferred.

What do the MTD for CT changes mean for businesses?

The scrapping of MTD for CT means that there are no upcoming changes to how to file your corporation tax returns. Before, small-to-medium businesses would have had to prepare for keeping digital records just for corporation tax, using MTD compliant software, and filing quarterly updates of their income and expenses with HMRC. Now that this has been abolished, businesses no longer need to prepare for these changes, which is likely a relief to many, as this removes a potential future compliance burden and takes away concern and confusion. There is no need to alter their current processes. 

Businesses must continue to file their CT600 corporation tax return to HMRC. This can be done via an accountant or by the business directly. Although this removes immediate compliance pressure, it’s still necessary to embrace digital tools as other forms of MTD are required.

Why going digital still matters

As well as needing to go digital due to MTD, there are a wide range of benefits to businesses going digital: 

More accurate accounting and fewer errors

When manually completing tax calculations, there is always the risk of human error. However, MTD-compatible software, such as QuickBooks, has VAT functionality, such as a built-in error checker which flags duplicates, inconsistent VAT codes, and missing transactions, helping you spot and fix any inaccuracies easily. This can help reduce the risk of human error and can ensure your accounting is much more accurate.  

Save valuable time

The majority of compatible accounting software will have a range of automated features that can save time by removing the need to update accounts manually each month. This allows business owners extra time for valuable areas. 

Improved cash flow management

Having digital records means that they can be easily accessed, so business owners can easily see the ingoings and outgoings from anywhere due to them being on cloud-based software. This allows you to track figures and projections in real time, allowing business owners to easily make decisions when it comes to cash flow. Accountants and other team members can also access and see any insights, allowing for better collaboration. 

Less risk of losing documents

One risk of keeping physical records and producing them on paper is that they could easily go missing. Digital records take this risk away, providing peace of mind that business owners will never misplace them. MTD compliant accounting software can also allow you to upload pictures of any receipts you may need and store them in a folder, ensuring these also won’t get lost. While this isn’t an MTD requirement, it can help when keeping track of business finances.

Overall, going digital means more organised and accurate accounting, more time to spend on other areas of the business, and more immediate insights into a business's financial situation. 

What should businesses do now?

While CT filing remains unchanged, now is the ideal time for businesses to continue to move forward with digital processes.

If businesses haven't already, they should review their digital setup. If they feel they’re still relying on manual processes and paper receipts, or their bookkeeping is slow and error-prone, they should consider upgrading their setup and working on going more digital. This is especially important for other MTD requirements that are still mandatory, such as MTD for VAT. It's important to stay compliant and prepare. 

If businesses aren't sure of the MTD obligations or how to stay compliant, they could speak to an accountant to gain further advice and understanding.

While HMRC has scrapped the MTD for Corporation Tax, this is not the end of digital tax; it's just a shift in focus. This change should offer short-term relief from the burdens of compliance for small and medium-sized businesses. However, this change shouldn’t result in scrapping their move to digital, especially with MTD for VAT already in place. Businesses that continue to embrace and build digital tools will stay ahead of any future changes and see a range of benefits. 

Take a look at our guide to Making Tax Digital jargon to understand all the new terminologies.

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