Will Making Tax Digital really start in 2026?

Yes – the new rules begin from 6 April 2026 if your total gross income from self-employment and/or property exceeded £50,000 in the 2024/25 tax year. After that, the rules extend to gross incomes over £30,000 from 6 April 2027, with planned legislation to widen the scope to incomes over £20,000 from 6 April 2028.

What if I earn money from self-employment and property?

You must comply with MTD if your combined gross income from self-employment and property goes over the qualifying threshold. You should keep separate digital records for each income source, but you can manage everything through the same MTD-compatible software. HMRC expects you to send separate quarterly updates for each income source and bring them together in one final declaration at the end of the tax year.

What counts as digital records for MTD?

Digital records include the date, amount and category of each business or property transaction. You keep this information directly in your software of choice, or in a spreadsheet that connects to HMRC through bridging software. When it comes to proof of expenses, the good news is you don’t necessarily need to scan or upload every individual receipt. You only need accurate digital records of the transactions. That said, it’s a good idea to keep any receipts separately, in case HMRC asks for evidence of them later.

Is Making Tax Digital only for VAT?

No. MTD started with VAT, but it now also applies to income tax for sole traders and landlords, once you pass the qualifying income threshold. If your income is above the threshold, you should keep digital records, send quarterly updates to HMRC and complete a final declaration through MTD-compatible software.

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What is qualifying income for MTD for Income Tax Self-Assessment?

What is qualifying income for MTD for income tax?

Written by Rachel Wait, Contributing writerEdited by Joe Phelan, Business finance editor, 12 January 2026

Fact Checked

Unsure how qualifying income for MTD works? This guide explains the essentials.

Woman working on a potter's wheel in her workshop.

Qualifying income is the total gross income you earn from self-employment and/or property-based businesses.

Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is a government initiative designed to make tax reporting easier, more accurate and completely digital.

It affects both sole traders and landlords, requiring them to submit four quarterly updates plus one final declaration each year to HMRC via MTD-compatible software.

The first phase of MTD starts on 6 April 2026. But exactly when it impacts you depends on your qualifying income.

Key takeaways

Qualifying income for Making Tax Digital (MTD) is the amount of gross income you earn from self-employment and property
Once your qualifying income exceeds certain thresholds, you need to start using MTD for income tax
You calculate qualifying income before deducting allowable business expenses, tax reliefs or personal allowances
Qualifying income doesn’t include employment income that’s taxed under PAYE, or income from savings interest, pensions or dividends

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What is qualifying income for Making Tax Digital?

Qualifying income is the amount of gross income you earn from all sources of self-employment and/or property before deducting expenses.

It matters because sole traders and landlords need to use MTD for income tax once their qualifying income (not profit) exceeds certain thresholds. These are as follows:

If your qualifying income is more than £50,000 for the 2024-25 tax year, you must use MTD from 6 April 2026
If your qualifying income is more than £30,000 for the 2025-26 tax year, you must use MTD from 6 April 2027
If your qualifying income is more than £20,000 for the 2026-27 tax year, you must use MTD from 6 April 2028

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What counts as qualifying income for MTD?

There are two main sources of qualifying income for MTD. These are:

Self-employment income – This includes all income you receive from working for yourself, including freelance, consultancy or sole-trader earnings
Property rental income – This includes all rental income from both UK and foreign residential or commercial properties. Note that if you co-own a property, only your share of the rental income counts

For example, if you earn £40,000 from self-employment and £12,000 in gross rental income, your qualifying income is £52,000. This means you would need to start using MTD for income tax from 6 April 2026.

You calculate qualifying income before deducting allowable business expenses, tax reliefs or personal allowances. So, it doesn’t matter that your profit is lower once you’ve deducted these.

What doesn’t count as qualifying income for MTD?

Qualifying income doesn’t include any of the following:

Employment income that’s taxed under Pay As You Earn (PAYE) – for example, a salary from an employer
Any dividends you receive, even if they are from your own company
Partnership income (in most cases)
Savings interest and pension income
Capital gains from the sale of properties
Qualifying care receipts (payments received for providing specific types of care under approved schemes)

As an example, if you earn £28,000 from your job under PAYE, £3,000 in savings interest and £2,500 in dividends, none of this contributes to your MTD qualifying income. This income doesn’t count because it’s not self-employment or property income.

However, if you earn £28,000 from your job under PAYE, but also £35,000 from self-employment, your qualifying income for MTD is £35,000, and you would need to use MTD for income tax from 6 April 2027.

How to calculate qualifying income for MTD

Here’s a clear, step-by-step approach to calculating qualifying income for MTD for income tax:

Identify income sources – This includes self-employment income plus property income. Exclude PAYE salary, dividends, pensions and interest, as well as partnership income (in most cases)
Use gross income – Make sure you haven’t deducted expenses, tax reliefs or allowances to reduce your figures
Adjust for property co-ownership – If you own a property with someone else, only include your share of the income
Add up your total qualifying income – For example, you might have £30,000 from self-employment and £30,000 from property income, giving you a total of £60,000
Compare with thresholds – In this example, your qualifying income is £60,000, which means you are over the £50,000 threshold for the 2024-25 tax year and must use MTD for income tax from April 2026

The GOV.UK website has more information on what does and does not count as qualifying income for MTD for income tax if you need further support.

MTD qualifying income FAQs

How much can you earn without declaring yourself self-employed?

Thanks to the trading allowance, you can earn up to £1,000 each year from self-employment without registering for self-assessment or submitting a tax return.

If you earn more than £1,000, you must register as self-employed with HMRC and report your income.

Do expenses affect my qualifying income for MTD?

No, you calculate qualifying income for MTD before deducting any expenses, allowances or reliefs. This means that even if your actual profit is low, your qualifying income could still put you over the threshold for MTD. For example, if you earn £52,000 from freelancing but you spend £12,000 on business expenses, your qualifying income is still £52,000, and you must use MTD from April 2026.

What if I co-own a property?

Only your share of the property income counts towards qualifying income, but remember that expenses don’t reduce this amount. So, if your portion of the income is more than £50,000, you still need to use MTD for income tax from April 2026.

What happens if I don’t comply?

If you fail to submit MTD updates or final accounts digitally once you’re required to, HMRC may issue you with a penalty.

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