Making Tax Digital for Income Tax: What Small Businesses in North Wales Need to Know (2026 Update)

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From April 2026, many sole traders and landlords across North Wales will need to follow new Making Tax Digital (MTD) rules for income tax. Here’s what you need to know to stay compliant and avoid penalties.

Key Dates and Income Thresholds

MTD for Income Tax Self Assessment (MTD ITSA) will roll out in stages, based on your income level:

April 2026: If your gross self-employment or property income is over £50,000
April 2027: If your income is over £30,000
April 2028 (expected): For incomes above £20,000

Your eligibility is based on income reported in your 2024/25 tax return. If you qualify, HMRC will notify you in advance.

What Will Change?

Instead of one annual tax return, you’ll now need to:

1. Keep Digital Records

Use HMRC-approved software or spreadsheets with bridging tools to log income and expenses throughout the year.

2. Submit Quarterly Updates

You’ll file summaries of income and expenses every three months. Deadlines:

7 August (for April–June)
7 November (for July–September)
7 February (for October–December)
7 May (for January–March)

3. Submit a Final Declaration

After the year ends, you’ll submit a final report (similar to your current Self Assessment return) by 31 January the following year.

What About Tax Payments?

You’ll still pay income tax once a year by 31 January. However, the quarterly updates help you better estimate your tax bill and improve cash flow management.

What You’ll Need

To comply with MTD, you’ll need:

Compatible software like QuickBooks, Xero, FreeAgent, or Sage
A Government Gateway account
Basic digital record-keeping skills

If you prefer spreadsheets, you can still use them — but you’ll need to connect them to HMRC via bridging software.

Who’s Exempt?

You can apply for an exemption if:

You’re unable to use digital tools due to age, disability, or location
It’s against your religious beliefs
You live somewhere without adequate internet access

Exemptions must be approved by HMRC.

Penalties for Late Filing or Payment

Starting from 2025, late tax payments will attract new penalties:

2% interest after 15 days late
Additional 2% after 30 days
10% annualized charge for longer delays

These will apply under MTD too, so timely filing is critical.

What This Means for Small Businesses in North Wales

If you’re a sole trader, landlord, or freelancer, MTD will require you to:

Use digital tools
Stay on top of your accounts throughout the year
Submit quarterly updates

Although this means more frequent reporting, it can simplify tax planning and reduce end-of-year stress—especially for seasonal businesses common in areas like tourism and agriculture.

What to Do Now

Here’s how to get ready:

Check your 2024/25 income – will you exceed £50,000?
Choose suitable software – many providers offer MTD-ready packages
Start keeping digital records early
Look out for a letter from HMRC confirming your start date
Practice quarterly reporting in 2025 if possible

Need Help?

If you’re unsure about which software to use or how to prepare, it’s worth speaking to your accountant or local business support services in North Wales. MTD is another administrative burden on hard working welsh business owners. Don’t let it get you down, give us a call and we’ll sort it.