With Making Tax Digital (MTD) for Income Tax finally set to go live in April 2026, many self-employed individuals and landlords are starting to question whether it’s time to incorporate their businesses.
While incorporation used to be seen as a straightforward tax-saving move, the landscape has shifted. So the big question is — does going limited still make sense? Or could it simply be a way to buy time before MTD kicks in?
Let’s unpack the pros, cons, and practical points to help you decide.
🧾 What Is MTD — and Who Will It Affect?
MTD is HMRC’s push to make tax reporting fully digital. From 6 April 2026, anyone who is self-employed or a landlord and earns over £50,000 will be required to:
- Keep digital records
- Submit quarterly updates to HMRC via approved software
- Send a final declaration each year to confirm income, claim reliefs and report other taxable sources (e.g. savings or employment income)
Those earning £30,000+ will be brought in from April 2027, with plans to include those earning over £20,000 before the end of the current Parliament.
What’s notable? Limited companies are not yet included in MTD for corporation tax — which means if you incorporate, you could avoid the new digital reporting regime for now.
🤔 Should I Incorporate to Avoid MTD?
Technically, yes — if you form a limited company, you’ll no longer fall under MTD for Income Tax. But it’s not that simple.
Incorporation brings with it a completely different set of responsibilities, including:
- Filing annual accounts with Companies House
- Submitting corporation tax returns
- Running a payroll (even if it’s just for yourself)
- Paying employer’s National Insurance contributions
- Submitting a Confirmation Statement annually
- Possibly making your business’s profits public, depending on size
So while you might dodge quarterly MTD submissions, you’re swapping one admin burden for another.
📉 Is There Still a Tax Advantage?
Incorporating used to be a smart way to reduce your tax bill, especially for profitable businesses. You could take a small salary, top up with dividends, and enjoy a lower overall tax rate.
But recent tax changes — including increased dividend tax rates and a shrinking tax-free dividend allowance — have reduced those savings significantly.
That doesn’t mean there’s no benefit at all. For some businesses, especially those that retain profits rather than drawing everything out, incorporation might still offer modest tax advantages. But these cases are becoming fewer and more specific.
🔐 What About Legal and Commercial Benefits?
Beyond tax, there are non-financial reasons why incorporation might still be appealing:
- Limited liability — your personal assets are protected
- More credibility with banks, investors, and clients
- Easier to scale, especially if you plan to employ staff or seek funding
So if you’re thinking about long-term growth, going limited might make strategic sense — regardless of the tax position.
💸 What Are the Costs?
- Incorporating costs £50 through Companies House
- There’s an annual £34 Confirmation Statement fee
- You’ll need to factor in accountancy fees for managing payroll, corporation tax, and statutory reporting
- And remember — MTD compliance software will also cost money, whether you’re self-employed or incorporated
So in terms of cost, it’s not always cheaper to stay self-employed.
🚨 What’s Changing Soon for Companies?
Keep in mind that upcoming legislation will require all companies, even the smallest ones, to file profit and loss accounts publicly. So if you value privacy, incorporation might be less appealing in future.
And while MTD for corporation tax isn’t here yet, HMRC plans to roll it out — so the reprieve may only be temporary.
🧠 Final Thoughts from Yorkshire Accountancy
Incorporating just to delay MTD might seem tempting, but it’s not a silver bullet. The decision should take into account your business goals, profits, lifestyle, and risk appetite.
At Yorkshire Accountancy, we help clients make the right choice — whether that means staying as a sole trader or moving to a limited company structure. We can also support you with MTD preparation so you’re ready for digital reporting either way.
📞 Want to talk through your options? We’re just a call away.
