Expansion of Making Tax Digital for Income Tax — Key Updates

Making Tax Digital (MTD) is a UK government initiative designed to modernise the tax system by requiring individuals and businesses to:

• Keep digital records using compatible software
• Submit quarterly income updates to HMRC
• Complete a final year-end declaration digitally

MTD for Income Tax Self Assessment (ITSA) will apply to individuals with qualifying income above certain thresholds. This includes:

• Self-employment income
• UK property income (rental)
• Foreign property income (e.g. overseas lets)

More employees to be caught by Making Tax Digital (MTD)

HMRC has released new rules stating who will be covered by the MTD regime. Previously if you had to complete the residence pages of your tax return you would not need to register for MTD. HMRC has now changed this approach and all individuals that have the relevant level of self-employment and property income, will need to register for MTD, even if they need to complete the residence pages. These individuals will now need to file quarterly MTD returns and an annual tax return.

What’s changing?
 Previously, individuals that completed the residence pages were exempt. Under the updated rules:

• MTD eligibility is triggered when self-employment + property income exceeds the threshold.
• Employment or pension income does not reduce or negate MTD obligations.
• This impacts many taxpayers with side businesses or UK rental income who are otherwise employed.

Updated Rollout Timeline

The updated timetable introduces a staggered rollout based on income levels. Key dates are:

This phased approach replaces the prior, more abrupt implementation plan.

*Note these limits are for gross income before expenses

New Late Payment Penalty Regime

From April 2025, HMRC will enforce a revised penalty structure for late tax payments under MTD:

This shift reflects a stricter and more immediate penalty structure, emphasizing timely compliance.

Clarified Eligibility Criteria

The £30,000–£50,000 thresholds refer only to self-employment and property income combined. Income from:

• Employment
• Savings and dividends
• Pensions

…does not count toward the MTD threshold, but also does not exempt you if your qualifying income exceeds it.

Example:

A UK-resident employee earning £90,000 and £32,000 in UK rental income must join MTD for ITSA from April 2027.

How Vialto Can Help

At Vialto Partners, we understand the challenges this transition presents—especially for individuals with cross-border income, global mobility, and non-domiciled tax positions. Our services include:

• Eligibility Reviews – Assess whether and when you’re caught by the new thresholds
• MTD Readiness Checks – Ensure your recordkeeping and software are compliant
• Property & Global Income Reporting – Help navigate MTD for clients with UK rental income and other sources
• Tax Payment Monitoring – Reduce penalty risk with proactive support
• Digital Platform Integration – Align MTD reporting with your broader financial systems

Whether you’re a mobile employee, landlord, or business owner, we provide end-to-end support to ensure MTD compliance — with minimal disruption.

To learn more, please contact:

Martin Muhleder
martin.muhleder@vialto.com

Andy Fahey
andrew.j.fahey@vialto.com

Ben ven den Dungen
benjamin.van.den.dungen@vialto.com