MTD qualifying income: how to work out whether MTD for Income Tax applies to you

Your qualifying income for Making Tax Digital (MTD) for Income Tax is your total self-employment and property income before expenses, taken from your tax return; wages, pensions and dividends don't count. If it was over £50,000 for 2024-25 you should have started on 6 April 2026, over £30,000 for 2025-26 means you start on 6 April 2027, and over £20,000 for 2026-27 means you start on 6 April 2028.

This guide shows how to work it out: what counts, what doesn't, how a job and a side business are treated, joint property, part-year income, more than one business, and which year's tax return sets your start date. For the wider picture, including exemptions and having an accountant, see Do I need MTD for Income Tax?. To check your own position in a minute, use the MTD eligibility checker.

Key facts

Which tax year decides when you start

HMRC's guidance on when you need to use MTD for Income Tax ties each start date to the qualifying income on one tax return:

HMRC compares the qualifying income on each return with the threshold for that year, and the test is whether it's more than the threshold. HMRC reviews your Self Assessment return each year. If your income is over the relevant threshold, it writes to confirm you need to start from the following tax year. If you don't get a letter, HMRC says it's still your responsibility to check and sign up.

You still file a normal Self Assessment return for the tax year before you start.

If your qualifying income is £20,000 or less, HMRC's exemptions guidance says you're automatically exempt.

What counts towards qualifying income

HMRC defines qualifying income as your total income from self-employment and property, before expenses, based on the tax return for the earlier tax year. That includes:

• Self-employment turnover. Sales, takings and fees from every self-employed business you have.
• UK property income. Your gross rent.
• Foreign property income, if you were UK tax resident. HMRC's example is a UK sole trader who also rents out a property in France: both count.
• Your share of jointly owned property income. See below.
• Some trust income. Property or trading income you're entitled to as a beneficiary of a bare trust, or that's paid straight to you from an interest in possession trust.
• Income treated as a trade under the transactions in UK land rules, where it continues over more than one tax year.
• Disguised investment management fees and income-based carried interest.

If you're VAT-registered and use the cash basis, you can choose whether to include VAT in your business income. If you include it, it counts towards qualifying income.

What doesn't count

According to the same HMRC page, these don't count towards qualifying income:

• employment (PAYE) income
• your share of profit from a partnership as an individual partner
• dividends, including from your own company
• the State Pension
• private pensions
• income from UK Real Estate Investment Trusts (REITs) or Property Authorised Investment Funds (PAIFs)
• qualifying care relief, for example if you're a foster or kinship carer
• transition profits from basis period reform
• one-off transactions in UK land that fall in a single tax year

You still report all of this on your tax return. It just doesn't decide whether you need to use MTD for Income Tax.

Turnover, not profit

The figure HMRC uses is income before expenses. For a sole trader that's turnover. For a landlord it's gross rent. Your profit after costs isn't part of the test.

HMRC's own example: £25,000 of rental income plus £27,000 of self-employment income gives qualifying income of £52,000, which is over £50,000.

Our illustration of HMRC's rules: a decorator has turnover of £36,000 for 2025-26 and spends £14,000 on materials and van costs, leaving £22,000 of profit. Their qualifying income is £36,000, not £22,000. That's over £30,000, so, assuming they weren't over £50,000 for 2024-25, they'd need to start MTD for Income Tax from 6 April 2027.

A job plus a side business

This is where many people overestimate their qualifying income. PAYE wages don't count at all. Only the side business's turnover, plus any property income, is measured against the threshold.

Our illustration: someone earns a £48,000 salary and runs a weekend photography business with turnover of £31,000 for 2025-26. Their qualifying income is £31,000. That's over £30,000, so, assuming they weren't already in from 2026, MTD for Income Tax applies from 6 April 2027 for the photography business. Their salary still goes on their tax return as usual.

Another illustration: someone earns £75,000 from a job and their side business turnover is £18,000 for 2026-27, with no property income. Their qualifying income is £18,000, which is £20,000 or less. If they weren't over the earlier thresholds either, they're automatically exempt.

If your side business and your job overlap, for example you're paid through payroll by one client and invoice others, speak to an accountant about which income is self-employment.

More than one business

Your qualifying income is the total from all your self-employment and property income sources, so turnover from each business is added together. You still keep separate digital records and send separate quarterly updates for each business, as our sole traders guide explains.

Our illustration: a hairdresser with turnover of £17,000 who also sells crafts online with turnover of £9,000, and gets £6,000 of gross rent from a flat, has qualifying income of £32,000. Each source is small on its own, but together they're over £30,000.

Jointly owned property

HMRC says only your share of the income counts. Its example: you and your sibling own a property that brings in £50,000 of rent, split equally, and you have no self-employment income. Your qualifying income is £25,000.

If you only find out your share after expenses have been taken off, HMRC uses that net figure. Our landlords guide covers how joint property works once you're in. If you're not sure how your share is split, speak to an accountant.

Part-year income

If you're a sole trader and your accounting period is shorter or longer than 12 months, for example in your first year of trading, HMRC annualises your income where it has the information. That means working out what your income would be over a full year. HMRC's example is doubling six months of turnover.

Landlords need to annualise their property income themselves.

Our illustration: someone starts trading on 6 October 2025 and has turnover of £17,000 by 5 April 2026. Annualised, that's £34,000, which is over £30,000.

If you're unsure how this applies to an unusual accounting period, speak to an accountant.

Where you live

If you were UK tax resident in 2024-25, HMRC counts your self-employment income and your UK and foreign property income.

If you weren't UK tax resident, HMRC only counts your UK property income and any self-employment income declared on your UK tax return. HMRC's example is someone tax resident in Spain who rents out a UK property and is a sole trader in Spain: only the UK rent counts. Some non-residents are exempt for now, which our landlords guide covers.

When income stops or a return changes

One source stops. If one business or property stopped since your last return but you still have other self-employment or property income, the income from the one that stopped still counts.

Everything stops. If all your self-employment and property income stopped before 6 April 2026, you don't need MTD for Income Tax. HMRC says you should tell it, or it may sign you up based on what it holds. You still file your return for that year.

You change a return. HMRC looks at changes to see whether they affect your qualifying income. A change made before the start of a tax year can bring you in or take you out for that year. After the tax year starts, a change that takes you under the threshold means you don't need MTD for Income Tax that year, but a change that takes you over isn't considered for that year.

Once you're in

If your qualifying income later falls below the threshold for 3 tax years in a row, HMRC says you can choose to opt out.

When you're in, you keep digital records, send quarterly updates and submit your tax return through compatible software. The dates are in MTD for Income Tax deadlines 2026-27. There are no penalties for late quarterly updates in 2026-27, as our penalties guide explains, but they still need to be sent.

For an official answer, use HMRC's checker on Find out if and when you need to use Making Tax Digital for Income Tax. It asks about your income for 2024-25, 2025-26 and 2026-27.

Getting ready with software

HMRC doesn't provide software. Its software finder lists recognised products, including some with a free version, and our guide to free MTD software compares a few.

Using AATAX

AATAX is on HMRC's list of recognised software for MTD for Income Tax. Its HMRC listing (reference D6Q7XM) shows sole trader, foreign property and all 16 other income items on a tax return as ready now. That matters if you have a job, pension or dividends alongside your business, because they still go on your tax return.

The individual app is free for sole traders and landlords. There's no subscription and you don't need to give card details. You upload bank statements, receipts or spreadsheets (CSV or Excel .xlsx), AATAX reads the documents, and you review and confirm the records. Letting agent statements are read with the full rent as income and the agent's fees as separate costs. At year end, the app shows HMRC's tax calculation before you send your final declaration.

If an accountant looks after your tax, they can run MTD for Income Tax for you, and you can point them to AATAX for accountants.

Get started

AATAX's individual app is free for sole traders and landlords. Upload your statements and receipts, check the figures and send your quarterly updates and tax return yourself, with no subscription and no card details. Get started free

Sources (GOV.UK, checked 10 October 2026)

• Work out your qualifying income for Making Tax Digital for Income Tax
• Find out if and when you need to use Making Tax Digital for Income Tax
• Find out if you can get an exemption from Making Tax Digital for Income Tax
• Find software that works with Making Tax Digital for Income Tax (HMRC software finder, including AATAX's listing)

This page is general guidance, not tax advice. If you're unsure how the rules apply to you, speak to an accountant or contact HMRC.