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Bookkeeping, MTD ITSA and Corporation Tax planning guide
When Making Tax Digital for Income Tax applies to you, how to get your bookkeeping ready before April 2026, and how Corporation Tax marginal relief, associated companies and capital allowances work in 2026/27.
Tax year: 2026/27. Last reviewed: Mon Apr 06 2026 00:00:00 GMT+0000 (Coordinated Universal Time).
MTD checklist and CT planner (Excel)Who MTD ITSA applies to, and when
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is the biggest change to how sole traders and landlords report income since Self Assessment began. Mandation is based on your qualifying income: your gross income (before expenses) from all sole-trade and property sources combined.
- From 6 April 2026: qualifying income over £50,000.
- From April 2027: the threshold drops to £30,000.
- From April 2028: the government has confirmed the threshold drops again to £20,000 (announced at Spring Statement 2025; the primary legislation to enact it is still to be introduced).
Note that the test is gross income, not profit. A landlord with £55,000 of rent and £30,000 of costs is in scope from April 2026 even though the profit is £25,000. If you have both a sole trade and rental property, the two are added together.
What changes under MTD ITSA
Once mandated, you must:
- Keep digital records of business income and expenses in MTD-compatible software (Xero, QuickBooks, Sage, FreeAgent and others).
- Send HMRC a quarterly update for each business. For standard quarters the deadlines are 7 August, 7 November, 7 February and 7 May.
- File a final declaration after the year end, which replaces the annual Self Assessment return.
Quarterly updates are summaries of income and expenses, not full returns, and no tax is payable at each quarter. The payment dates (31 January balancing payment, 31 January and 31 July payments on account) do not change.
Getting your bookkeeping ready
The businesses that struggle with MTD are the ones that treat bookkeeping as a once-a-year exercise. Before your mandation date:
- Separate bank accounts. Run all business transactions through a dedicated account. Mixed accounts make quarterly reporting slow and error-prone.
- Connect bank feeds and reconcile at least monthly. A quarter's backlog compressed into the week before a 7th-of-the-month deadline is where penalties come from.
- Map your expense categories to the HMRC self-employment categories once, so every quarter is consistent.
- Agree who submits. You or your accountant can file quarterly updates, but decide now and build the handover into your monthly routine.
The Excel checklist in this pack scores you against ten readiness checks and tells you your mandation date from your qualifying income.
Corporation Tax rates 2026/27
UK Corporation Tax has three effective bands:
| Taxable profit | Rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,000 to £250,000 | Marginal relief: effectively 26.5% on each £1 in this band |
| Over £250,000 | 25% (main rate) on all profit |
The marginal band is the planning zone. A company with £80,000 of profit pays 19% on the first £50,000 and 26.5% on the next £30,000, so every £1 of extra deduction found in that band saves 26.5p, more than at either the small or main rate.
Associated companies divide the limits
The £50,000 and £250,000 limits are divided by the number of associated companies: broadly, companies under common control. Two associated companies each get limits of £25,000 and £125,000. This catches many owner-managers with a second company (a dormant company does not count, but a property company alongside a trading company usually does). The limits are also pro-rated for accounting periods shorter than 12 months.
If you control more than one active company, check the divided limits before assuming the 19% rate applies. The planner in this pack does the division for you.
Capital allowances in 2026/27
Capital spend is the most common lever for taking profit out of the marginal band:
- Annual Investment Allowance (AIA): 100% relief in year one on qualifying plant and machinery, up to £1,000,000 per year. This covers most equipment purchases for small companies.
- 40% first-year allowance: introduced by Finance Act 2026 for qualifying main-rate expenditure, available to all businesses. Relevant mainly where the AIA is exhausted.
- Writing down allowance: the main-pool rate is 14% a year (reduced from 18% by Finance Act 2026). The special rate pool stays at 6%.
Timing matters. £20,000 of qualifying spend brought forward into a year where profit sits in the marginal band saves £5,300 (26.5%), against £3,800 (19%) if profit is below £50,000. The planner shows the saving at your own figures.
Corporation Tax deadlines
- Payment: 9 months and 1 day after the end of the accounting period (for companies below the large-company instalment thresholds).
- CT600 return: 12 months after the end of the accounting period.
- Accounts to Companies House: 9 months after the year end for a private company.
The payment deadline lands before the filing deadline, so the tax computation needs to be done well before the return is due. Late payment attracts interest from day one; late filing penalties start at £100 and escalate.
Check if and when MTD applies to you
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