MTD Income Threshold Explained: Does Your Income Qualify?

The single biggest question around Making Tax Digital for Income Tax is: does it apply to me? The answer depends on your qualifying income, and how that is calculated is not always obvious.

This article explains exactly how the MTD income threshold works, what counts as qualifying income, and how to check whether you are above or below the line.

The Thresholds

If your qualifying income is below these thresholds, MTD for Income Tax does not currently apply to you. You can continue with traditional Self Assessment.

These thresholds apply to individuals, not businesses. It does not matter whether you are a sole trader, a freelancer, or a landlord — the same income test applies.

What Counts as Qualifying Income?

Qualifying income is your gross income from:

• Self-employment — your total turnover before deducting expenses
• Property income — your total rental income before deducting expenses

It is the gross figure that matters, not your profit. This catches many people out. If your turnover is £55,000 but your profit after expenses is only £25,000, you still need to comply because the gross income exceeds £50,000.

HMRC uses the term "qualifying income" specifically to mean gross self-employment and property income. No other income types are included.

Combined Income

If you have both self-employment and rental income, these are added together to determine whether you exceed the threshold.

For example: - Self-employment turnover: £35,000 - Rental income: £20,000 - Combined qualifying income: £55,000 — above the £50,000 threshold

Even though neither source alone exceeds £50,000, the combined total does, so you must comply with MTD.

This is particularly relevant if you have a second income alongside your main job. Any self-employment or property income counts, regardless of whether it is your primary source of earnings.

What Does NOT Count

The following income sources do not count towards the MTD threshold:

• Employment income (PAYE)
• Dividends
• Savings interest
• Pension income
• Capital gains
• State benefits

These are excluded because MTD for Income Tax only applies to self-employment and property income. Your other income is still reported through Self Assessment alongside your MTD Final Declaration.

A common misconception is that a high overall income automatically triggers MTD. It does not. An employee earning £100,000 through PAYE with no self-employment or rental income has zero qualifying income for MTD purposes.

Common Misconceptions

"My profit is under £50,000 so I am fine"

No. The threshold is based on gross income, not profit. A plumber with £60,000 in turnover and £40,000 in expenses has qualifying income of £60,000 — well above the threshold, despite only £20,000 in profit.

"I only rent one property so it cannot be much"

The amount matters, not the number of properties. One property generating £55,000 in gross rental income puts you above the threshold just as much as five properties would.

"I have a second job but it is only part-time"

Part-time self-employment still counts. If you are employed full-time and do freelance work on the side, the freelance turnover is qualifying income. If it pushes your combined self-employment and property income above the threshold, you must comply. See our guide on MTD for second income for more detail.

"I am VAT-registered so I already do MTD"

MTD for VAT and MTD for Income Tax are separate programmes. Being registered for MTD for VAT does not satisfy your MTD for Income Tax obligations. You need to sign up for MTD for Income Tax separately.

Which Tax Year Determines Eligibility?

Your obligation for a given tax year is based on your qualifying income from a previous tax year. For the first year of MTD (2026/27), HMRC looks at your 2024/25 income to determine whether you need to comply.

This means: - If your 2024/25 gross self-employment and property income exceeded £50,000, you must use MTD from April 2026 - If your income has since dropped below £50,000, you still need to comply for 2026/27

The threshold test looks backwards, not at your current year's expected income.

Multiple Self-Employments

If you have more than one self-employment (for example, a freelance consultancy and a separate sole trader business), the gross income from all self-employments is combined.

A graphic designer earning £30,000 from client work and £25,000 from a separate Etsy shop has combined self-employment income of £55,000. Both count. The same applies to gig economy workers — if you drive for Uber and also do Deliveroo, both sources are combined.

What If Your Income Fluctuates?

If your income is close to the threshold and varies year to year, you may find yourself mandated in some years but not others. HMRC will use the qualifying year's income to determine each year's obligation.

In practice, if your income is anywhere near £50,000, it may be worth using MTD software voluntarily. This avoids the disruption of switching in and out of MTD each year, and you will be ready when the threshold drops to £30,000 in April 2027.

For more on voluntary compliance, see our guide to voluntary MTD registration.

Worked Examples

Example 1: Sole trader, straightforward

Sarah runs a catering business. In 2024/25 her turnover was £62,000 and her expenses were £38,000, leaving £24,000 profit. Her qualifying income is £62,000 (gross turnover). She must comply with MTD from April 2026.

Example 2: Landlord with a day job

James works full-time in IT (salary £45,000 PAYE) and owns two rental properties generating £28,000 in gross rent. His qualifying income is £28,000 — the PAYE salary does not count. He is below the £50,000 threshold for 2026/27, but will need to comply from April 2027 when the threshold drops to £30,000.

Example 3: Freelancer plus rental income

Priya does freelance marketing (turnover £32,000) and has a rental flat (gross rent £22,000). Combined qualifying income: £54,000. She must comply from April 2026, even though neither source alone exceeds £50,000.

Example 4: Income just below the threshold

Tom is a self-employed electrician. His 2024/25 turnover was £48,000. He is below the £50,000 threshold for 2026/27, so MTD is not mandatory. But he should check his 2025/26 turnover — if it exceeds £50,000, he will need to comply from April 2027. And if it exceeds £30,000, he will definitely be mandated when the lower threshold kicks in.

The £30,000 Threshold in 2027

From April 2027, the threshold drops to £30,000. This will bring significantly more people into MTD — HMRC estimates an additional 900,000 taxpayers.

If your qualifying income is between £30,000 and £50,000, you have until April 2027 to prepare. Use this time to choose MTD-compatible software, set up digital record-keeping, and familiarise yourself with the quarterly submission process.

How to Check

To determine whether you need to comply:

1. Look at your 2024/25 Self Assessment return
2. Find your gross self-employment turnover (box 15 on the short self-employment pages, or box 19 on the full pages)
3. Add your gross property income if applicable
4. If the total exceeds £50,000, you need MTD from April 2026

If you are unsure, check our guide on whether you need MTD software or consult your accountant.

Exemptions

Even if your income is above the threshold, you may be exempt from MTD in certain circumstances — including digital exclusion, insolvency, or specific HMRC discretions. See our full guide to MTD exemptions for details.

What If You Need to Comply?

If your qualifying income puts you above the threshold, you need to:

1. Sign up for MTD with HMRC if you have not already
2. Choose MTD-compatible software and connect it to HMRC
3. Start keeping digital records and submit quarterly updates

The first quarterly deadline for 2026/27 is 7 August 2026. There is a soft landing in the first year that waives penalty points for late quarterly submissions — but payments and the Final Declaration are not covered, so getting set up promptly is still important.

Frequently Asked Questions

Is the MTD threshold based on profit or turnover?

The MTD threshold is based on gross income (turnover), not profit. If your self-employment turnover is £55,000 but your profit after expenses is only £20,000, you must still comply because your gross qualifying income exceeds the threshold.

Does my rental income count towards the MTD threshold?

Yes. Gross rental income from property is combined with any self-employment income to determine your total qualifying income. If the combined figure exceeds the threshold, you must comply with MTD for Income Tax.

What happens if my income drops below the threshold after I start MTD?

If your qualifying income falls below the threshold in a later tax year, you may be able to leave MTD from the following April. However, you must remain compliant for the current tax year. Check with HMRC or your accountant for the specific exit rules.

Does my PAYE salary count towards the MTD threshold?

No. Employment income paid through PAYE does not count towards the MTD qualifying income threshold. Only self-employment turnover and gross property income are included in the calculation.

When does the MTD threshold drop to £30,000?

The threshold drops to £30,000 from April 2027. If your qualifying income exceeded £30,000 in the 2025/26 tax year, you will need to comply with MTD from the 2027/28 tax year onwards.