Qualifying income for MTD: how to work it out, with examples

Qualifying income is the figure HMRC uses to decide whether you must use Making Tax Digital for Income Tax, and from when. It is the total of your self-employment income and your property income before any expenses are taken off. HMRC also calls this turnover.

The figure comes from a tax return you have already sent, not from the current year. HMRC looks at the return for an earlier tax year and adds up the gross income from each self-employment and property source on it. You can have more than one source, and they all go into the same total.

Because the test uses income before expenses, your profit does not decide it. A landlord with £40,000 of rent and £25,000 of costs has qualifying income of £40,000, not £15,000.

If you are UK resident, add together the gross income from each of these sources. Every source goes into one total.

• Self-employment turnover from each sole-trade business, before expenses.
• UK property income, such as rent, before expenses.
• Foreign property income, before expenses.
• Your share of income from a property you own jointly with someone else.
• Income from a source that has stopped since your last return, if you still have another self-employment or property source that continues.

Some income goes on your tax return but is left out of qualifying income. A large salary or pension does not bring you into Making Tax Digital on its own.

Your share of a partnership profit is a special case. It does not count towards qualifying income, and you do not keep digital records or send quarterly updates for it. It still goes on your tax return through your software at the end of the year.

• Employment income taxed through PAYE.
• Your share of partnership profit as an individual partner.
• Dividends, including dividends from your own company.
• State Pension and private pensions.
• Transition profits from basis period reform.
• Income that gets qualifying care relief.
• One-off transactions in UK land.
• Income from UK REITs or PAIFs.

Each start date has its own threshold and its own test year. The threshold is always “more than” the figure, so qualifying income of exactly £50,000 on your 2024 to 2025 return does not bring you in from April 2026. Qualifying income of £20,000 or less means you are automatically exempt.

You still send a normal Self Assessment return for the tax year before you start. HMRC checks returns each year and writes to people who are over a threshold. If no letter arrives, GOV.UK is clear that checking is still your responsibility.

Changes made to a return after a tax year has started are treated differently depending on which way they go. An amendment that takes you over the threshold is not considered for that year. An amendment that takes you under it means you do not need to use Making Tax Digital for that year.

Take a fictional self-employed designer with one business and no other self-employment or property income. Her accounts show healthy costs, but those do not matter for the test.

Her turnover of £48,000 on the 2024 to 2025 return is not more than £50,000, so she did not need to start in April 2026. If her 2025 to 2026 return shows the same turnover, that is more than £30,000, so she must use Making Tax Digital from 6 April 2027.

Now take a fictional landlord who owns two rented flats in the UK in her own name and has no self-employment. Her rent is the qualifying income. Repairs, letting agent fees and insurance come off her profit but not off her qualifying income.

Mortgage interest on a residential let does not reduce qualifying income either. It is not an expense for individual landlords at all. It gets a basic rate tax reduction instead, which has nothing to do with the MTD test.

GOV.UK gives its own example of two sources added together. Someone with £25,000 of rent and £27,000 of self-employment income has qualifying income of £52,000. Neither source would be over £50,000 on its own, but the total is.

Suppose that person also has a part-time job paying £20,000. The salary is employment income, so it stays out of the total. If those figures were on the 2024 to 2025 return, qualifying income of £52,000 is more than £50,000, so they should have started using Making Tax Digital from 6 April 2026.

If you own a let property with someone else, only your share of the income counts towards your qualifying income. GOV.UK’s example is a jointly let property with £50,000 of rent split equally. Each owner has qualifying income of £25,000 from it.

Sometimes a joint owner is only told their share after expenses have been taken off. In that case HMRC uses that net figure for your qualifying income.

Your share is added to any other self-employment or property income you have. A joint owner with a £25,000 share of rent and £10,000 of self-employment turnover has qualifying income of £35,000. On a 2025 to 2026 return that is more than £30,000, so they would start on 6 April 2027. Our article on Making Tax Digital for jointly owned property covers what each owner records and sends.

Most errors come from using the wrong figure or the wrong year. Check each source on the return HMRC tests.

Short or long accounting periods need care. HMRC annualises a sole trader’s income where it has the information. Landlords must annualise their own figure.

• Adding a salary, pension or dividends, which do not count.
• Forgetting foreign property income when you are UK resident.
• Counting the whole rent from a joint property instead of your share.
• Looking at the current year instead of the return HMRC tests.
• Assuming that no letter from HMRC means you do not need to use MTD.

If your qualifying income is over a threshold, you need to sign up and choose software that works with Making Tax Digital for Income Tax. HMRC does not provide software. You then keep digital records and send quarterly updates for each business. Some products, such as SimpleTaxFlow, let you keep your own spreadsheet and send the totals.

If your qualifying income is £20,000 or less, you are automatically exempt, but you still send a Self Assessment return. Other exemptions exist, including one you can apply for if you are digitally excluded.

Once you are in, you can leave if your qualifying income is below the relevant threshold for 3 tax years in a row. For the third year, HMRC uses your fourth quarterly update. If you joined in April 2026, the earliest you could leave is after the 2028 to 2029 tax year, with £20,000 or less in each of the three years.

Tax rules can change and your circumstances matter. Use HMRC’s current guidance to confirm what applies to you.