Dividend income is completely excluded from the Making Tax Digital qualifying income calculation — including dividends from your own limited company. This is true regardless of how large the dividend is. Many company directors searching for this answer are relieved to learn that their standard salary-plus-dividend structure has zero MTD implications on its own.
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Director pay doesn't count — but does your personal income?
Company salary (PAYE)
£
Dividends from your company
£
Personal self-employment income (separate from your company)
£
Personal UK rental income (held by you, not your company)
£
Salary and dividends are shown for context only — they never count towards your personal MTD threshold.
If you are a limited company director paying yourself a combination of salary and dividends — the standard tax-efficient structure used by hundreds of thousands of UK small business owners — this question matters to you directly. The good news: dividends are straightforward when it comes to MTD.
Why Are Dividends Excluded From MTD?
Making Tax Digital for Income Tax applies specifically to self-employment income and UK property rental income — the two categories where HMRC previously had limited visibility throughout the year. Dividend income, by contrast, is already reported through other mechanisms: companies file Corporation Tax returns, and individuals declare dividend income on their annual tax return (now the Final Declaration under MTD).
Crucially, MTD for Corporation Tax was confirmed cancelled by HMRC in late 2025 — it will not be introduced. This means limited companies themselves have no MTD obligation of any kind. The MTD ITSA rules apply only to individuals with personal self-employment or rental income.
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The rule in one sentence: MTD qualifying income = gross self-employment turnover + gross UK property rental income, both held personally by you as an individual. Income received by your company, and dividends paid from your company to you personally, are both outside this calculation entirely.
The Standard Director Salary + Dividend Structure
Most UK limited company directors pay themselves a small salary — often set at the National Insurance threshold — and take the remainder of their income as dividends, which attract lower tax rates than salary. This structure is extremely common and, for MTD purposes, is entirely uncomplicated:
Your salary is PAYE income — excluded from MTD qualifying income
Your dividends are dividend income — excluded from MTD qualifying income
Your company's profits remain subject to Corporation Tax only — no MTD obligation, confirmed cancelled
A director who takes £12,570 salary and £80,000 in dividends has £0 qualifying income for MTD from this structure — regardless of how large either figure is.
When DOES a Company Director Need MTD?
The salary-plus-dividend structure itself never triggers MTD. However, many directors have additional personal income outside their company that can put them in scope:
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Scenario 1: Standard director, no other income
£12,570 salary + £75,000 dividends from own company
Not in scope — ever, under this structure
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Scenario 2: Director who also personally owns rental property
£12,570 salary + £60,000 dividends + £55,000 gross rental income (held personally, not through the company)
Phase 1 — mandatory from April 2026
The £55,000 personal rental income alone exceeds the £50,000 threshold. The salary and dividends are entirely irrelevant to this determination.
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Scenario 3: Director with a separate sole trade
£12,570 salary + £40,000 dividends from Company A + £35,000 gross self-employment income from an unrelated personal sole trade
Phase 2 — April 2027
£35,000 self-employment income (held personally, separate from the company) falls in the Phase 2 band. The company income (salary + dividends) is excluded entirely.
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Scenario 4: Property held through a limited company
Rental properties owned by "Smith Properties Ltd" — director receives dividends from the company
Not in scope — company income, not personal
If rental properties are owned by a limited company rather than personally, the rental income belongs to the company (subject to Corporation Tax, no MTD), and what the director receives is dividend income (excluded). This is a key reason some landlords incorporate — though the decision involves many other tax factors beyond MTD and should be discussed with an accountant.
A Note on Property Investment Companies
Some landlords hold their rental portfolio inside a limited company ("SPV" — special purpose vehicle) rather than personally. If your rental properties are owned by a company:
The rental income belongs to the company, not to you personally
The company pays Corporation Tax on rental profits — no MTD obligation (confirmed cancelled)
What you receive personally is dividend income — excluded from MTD
This is sometimes cited as an MTD-avoidance benefit of incorporating a property portfolio. However, the decision to hold property through a company involves significant tax trade-offs — including mortgage interest relief, Capital Gains Tax on incorporation, ongoing Corporation Tax rates, and the cost of extracting profits as dividends. Do not make incorporation decisions based on MTD alone — speak to a qualified accountant about your overall position.
How Dividends Are Reported If You ARE in MTD
If your personal rental or self-employment income puts you in scope of MTD — separate from any company dividends — your dividend income is still declared, just not through quarterly updates. It forms part of your annual Final Declaration (due 31 January), exactly as dividend income was declared on the old Self Assessment return (SA100, dividends section).
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In practice: Your MTD quarterly updates contain only your personal self-employment and rental figures. Your dividend voucher information continues to be needed at year-end for the Final Declaration — your accountant or software pulls this together with your quarterly-reported income to calculate your overall tax position, same as before.
Frequently Asked Questions
No. Dividend income is excluded from the MTD for Income Tax qualifying income calculation. This applies to dividends from your own limited company, investment dividends, and investment trust distributions — all excluded regardless of amount.
Not because of your salary or dividends — both are excluded from MTD qualifying income. You would only need MTD if you personally also have self-employment income or UK rental income above the threshold, separate from your company.
No. HMRC confirmed in late 2025 that MTD for Corporation Tax will not be introduced. Limited companies continue to file Corporation Tax returns (CT600) exactly as before, with no MTD obligation.
No. Dividend income of any size, from any source, does not count towards your MTD qualifying income. A director receiving £150,000 in dividends has £0 qualifying income from that dividend, regardless of amount.
No. Dividend income is declared in your annual Final Declaration (due 31 January) alongside other non-qualifying income such as pension and PAYE — not in quarterly updates, which only cover self-employment and rental income.
This is a significant tax decision that should never be based on MTD alone. Incorporating a property portfolio involves Capital Gains Tax on the transfer, Stamp Duty Land Tax considerations, ongoing Corporation Tax on rental profits, and the cost of extracting profits as dividends. While it does remove the properties from your personal MTD calculation, the overall tax impact can be significant in either direction depending on your circumstances. Speak to a qualified accountant before making this decision.
Check Your Personal MTD Position
If you have personal rental or self-employment income alongside your company, our free calculator tells you exactly where you stand.