Making Tax Digital is Here — What South Wales Businesses Need to Know

If you are a sole trader or landlord earning over £50,000 a year, the way you report your income to HMRC has changed. Making Tax Digital for Income Tax (MTD for IT) came into force in April 2026, and whilst the deadline has passed, many businesses across South Wales are still catching up, or have not yet fully made the switch.

This article explains what MTD for Income Tax means, who it affects right now, what comes next, and how to make sure your business is compliant before the next quarterly reporting deadline.

What is Making Tax Digital for Income Tax?

Making Tax Digital is HMRC's programme to move the UK tax system online. Rather than submitting a single annual Self Assessment return, those within scope must now keep digital records of their income and expenses, and submit quarterly updates to HMRC using MTD-compatible software.
This represents one of the most significant changes to UK tax compliance in decades. It affects the way you record transactions day to day, not just how you file at the end of the year.

Who does it affect right now?

From 6 April 2026, MTD for Income Tax applies to sole traders and landlords whose combined gross income exceeds £50,000. According to HMRC's own figures, this brings approximately 780,000 taxpayers into the new regime.
The rollout continues in subsequent years:

From April 2027: those with income over £30,000
From April 2028: those with income over £20,000

It is worth noting that the threshold is based on your gross income from the 2024/25 tax year — so if you were above £50,000 in that year, you are in scope now.

What do you need to do?

If you have not yet made the switch, the priority actions are straightforward:

Register for MTD for Income Tax with HMRC (if you haven't already)
Adopt MTD-compatible accounting software such as QuickBooks, Xero, or FreeAgent
Begin keeping digital records of all income and business expenses
Submit quarterly updates to HMRC within one month of each quarter's end

One common misconception is that MTD means paying tax four times a year. It does not. Your quarterly submissions are updates of income and expenditure only — your actual tax liability is still settled through the usual payment on account process.

What about the new penalty regime?

HMRC has introduced a points-based penalty system alongside MTD. Rather than an immediate fine for a single missed filing, you accumulate points for late submissions. Once you reach a threshold number of points, a financial penalty is triggered. This makes consistent, timely filing more important than ever.

Making Tax Digital is Here — What South Wales Businesses Need to Know

What is Making Tax Digital for Income Tax?

Who does it affect right now?

What do you need to do?

What about the new penalty regime?

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