Your MTD &
Tax Planning Guide
From 6 April 2026, if your self-employment or rental income exceeded £50,000 in the 2024/25 tax year, you are legally required to submit four quarterly updates to HMRC every year — on top of your annual tax return. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028, meaning more people will be caught each year. Operating through a limited company removes this obligation entirely — corporations file annual accounts and a single corporate tax return, with no MTD for Income Tax requirements.
Clients switching to a limited company through White & Co are typically saving over £1,000 every month in tax — that is more than £12,000 a year kept in your pocket rather than paid to HMRC.
On top of the financial saving, incorporation means moving away from quarterly MTD filing obligations — fewer deadlines, less admin, and significantly less stress throughout the year. Read on to see how the numbers stack up for you.
As a sole trader or self-employed individual within the MTD thresholds, you now face a significantly heavier compliance burden. Here is what HMRC now requires of you each year:
A digital summary of your income and expenses must be submitted to HMRC every three months — not just once a year.
You must use HMRC-recognised software to maintain digital records and submit every update. Spreadsheets alone are not sufficient.
On top of quarterly submissions, you must still file a final end-of-year declaration by 31 January confirming your total tax position.
From April 2027, missed quarterly submissions attract penalty points — four points triggers a £200 fine, with further penalties on top.
Moving from sole trader to limited company is a straightforward process. We handle the bulk of the work for you. Here is the process from start to finish:
Companies are exempt from MTD for Income Tax. File once a year and free yourself from quarterly reporting obligations.
Corporation Tax on small profits is 19% — significantly less than the 40% higher-rate Income Tax a successful sole trader typically pays.
Draw a low salary to use your personal allowance, then take profit as dividends which attract lower tax rates than employment income.
A non-working spouse or partner can be appointed as a director, allowing the company to use their personal allowance and basic-rate band — doubling the tax-free income available.
Your personal assets are protected. As a sole trader, you are personally liable for all business debts; as a director, the company is a separate legal entity.
Leave profits in the company and pay Corporation Tax at 19%. Only take money out when it suits your personal tax position — giving you complete control over your tax bill.
As a sole trader under MTD, you face five separate HMRC submissions every year — four quarterly updates plus a final declaration — each requiring up-to-date digital records and compatible software. Miss one and the penalty points start accumulating. As a limited company director, that burden disappears entirely. You have just three annual obligations — your company accounts, your Corporation Tax return, and your personal tax return. We manage all of them, handle all correspondence with HMRC, and keep you ahead of every deadline so you can focus on running your business, not managing your tax admin.
Incorporation is not beneficial for everyone at every income level. The table below outlines when it typically starts to make financial and practical sense, based on your annual turnover and profit. The MTD obligation alone makes it worth considering at the £50,000+ threshold, even before any tax saving.
| Annual Profit | MTD Required? | Incorporation Beneficial? | Typical Position |
|---|---|---|---|
| Under £30,000 | Not yet | Generally no | Administration costs likely outweigh tax saving at this level. Stay as sole trader for now. |
| £30,000 – £50,000 | From Apr 2027 | Possibly | Tax saving begins to emerge. Worth modelling. MTD will soon apply — good time to plan ahead. |
| £50,000 – £100,000 | Yes — now | Yes — recommended | MTD applies now. Significant NI and Income Tax savings available. Incorporation makes clear financial sense. |
| £100,000+ | Yes — now | Strongly recommended | Very substantial tax savings. Personal allowance taper above £100k makes sole trader status particularly costly. |
The above is a general guide. Your individual circumstances, expenses, and personal financial position will affect the outcome. We recommend a tailored review with our team before making any decision.
One of the most powerful benefits of incorporation is the ability to pay yourself — and your spouse or partner — a salary set at the most tax-efficient level. The personal allowance for 2026/27 is £12,570. By paying a salary up to this level, your company can claim a corporation tax deduction on the wage cost, while you personally pay zero Income Tax on that salary.
Additionally, if your spouse or partner is not in employment elsewhere, they can be appointed as a director of your company. Even if they carry out only limited duties, their appointment means the company can also pay them a salary up to the personal allowance threshold — effectively doubling the tax-free salary extraction available to your household.
The example below is based on a single person earning £80,000 net profit per year, with no spouse director. It illustrates the tax position as a sole trader compared to operating through a limited company with an optimal salary and dividend strategy. All figures use 2026/27 rates.
| Item | Sole Trader | Limited Company |
|---|---|---|
| Net profit / taxable income | £80,000 | £80,000 |
| Director salary (personal allowance) | N/A | £12,570 |
| Income Tax on salary | £27,432 | £0 |
| Class 4 National Insurance (sole trader) | £3,757 | N/A |
| Corporation Tax on remaining profit | N/A | ~£12,817 |
| Dividend Tax (on dividend extraction) | N/A | ~£5,200 |
| Total tax liability | ~£31,189 | ~£18,017 |
| Estimated annual tax saving: ~£13,000 | ||
Illustrative example only. Actual figures depend on your level of profit extraction, expenses, dividend allowance usage, personal circumstances and any other income sources. We will produce a personalised calculation for you as part of our consultation.
Everything is priced as a simple monthly figure — no large annual invoices, no surprises. The one-off setup cost covers getting your company registered and authorised with HMRC. From there, your ongoing fee covers everything we do for you throughout the year.
Ready to explore incorporation?
Contact us to arrange a no-obligation consultation. We will review your personal circumstances, run the numbers, and advise whether a limited company is the right structure for you.