Making Tax Digital for Income Tax is not coming. For sole traders and landlords with qualifying income over £50,000, it has been in force since 6 April 2026.
Two more tiers follow. The £30,000 threshold applies from 6 April 2027, and £20,000 from 6 April 2028. What trips people up is not the dates — it is the definition of “qualifying income” and the fact that each threshold is tested against a tax year that has already closed.
Get the definition wrong and you will either sign up a year early or miss the year you were mandated.
The three thresholds and their lookback years
| Qualifying income | Measured on your return for | Mandated from |
|---|---|---|
| Over £50,000 | 2024/25 | 6 April 2026 |
| Over £30,000 | 2025/26 | 6 April 2027 |
| Over £20,000 | 2026/27 | 6 April 2028 |
Read that middle column carefully. Each threshold is tested against a tax year that ended before the mandation date. HMRC checks the Self Assessment return you submitted in the previous tax year, not your current trading.
So the £30,000 tier that starts on 6 April 2027 is decided by your 2025/26 return — the one filed by 31 January 2027. If your income has since collapsed, you are still in. If it has since doubled, that does not pull you in early. Changes you make to a return after the start of a tax year that push your qualifying income above the threshold are not considered for that year.
Partnerships are not yet in scope and HMRC has not published a timeline.
What “qualifying income” actually means
This is the definition that matters, and it is narrower and blunter than most people assume.
Qualifying income is your total income from self-employment and property before expenses — turnover, not profit.
Three things follow from that:
It is gross. A landlord with £55,000 of rent and £30,000 of mortgage interest, agent fees and repairs has qualifying income of £55,000, not £25,000. Profitability is irrelevant. You can be mandated into MTD in a year you made a loss.
It combines both streams. Self-employment and property are added together. HMRC’s own worked example: £25,000 of rental income plus £27,000 of self-employment income gives qualifying income of £52,000 — over the threshold, even though neither source is close on its own.
Nothing else counts. These sources are excluded from the calculation entirely:
- employment (PAYE) income
- your share of profit from a partnership as an individual partner
- dividends, including from your own company
- State Pension
- private pensions
A consultant earning £70,000 through PAYE with £12,000 of rental income has qualifying income of £12,000. Not mandated. A £48,000 salary alongside £2,000 of dividends and £51,000 of self-employment turnover gives qualifying income of £51,000. Mandated.
Also inside the calculation
- Jointly owned property — your share counts. Own a property with a sibling generating £50,000 of income split equally, with no self-employment, and your qualifying income is £25,000. If you are only ever told your share after expenses have been deducted, HMRC assesses that net figure.
- Foreign property — counts if you were UK tax resident and it was on your return. If you were not UK resident, only UK property income and self-employment income declared on your UK return count.
- Bare trust and interest in possession beneficiaries — property or trading income you are entitled to, or that is paid directly to you bypassing the trustees, counts.
- VAT under the cash basis — if you include VAT when you declare your business income, it counts towards qualifying income.
Explicitly outside it
- Transition profits from basis period reform
- Qualifying care relief received by foster and kinship carers
- Income from UK REITs and Property Authorised Investment Funds
- One-off transactions in UK land that do not continue past a single tax year
Averaging relief does not change your qualifying income either way.
The awkward edges
Short trading periods get annualised. If you are a sole trader who has only traded for six months in a tax year, HMRC doubles the income to work out what a full year would look like. If your income is from property, you have to annualise it yourself.
Ceased sources still count — sometimes. Sell a rental property but carry on trading, and that property income still counts towards qualifying income for the lookback year. It only drops out if all your self-employment and property sources have ceased, and even then you have to tell HMRC before the start of the next tax year. If you do not, you remain in MTD.
Amending a return can move you. If you amend before the start of a tax year and it pushes you over, you are in. Amend before the start and it takes you under, you are out. Amend after the tax year has started and it takes you under, you are out for that year — but an amendment after the start that takes you over is ignored until the following year.
Falling below does not release you automatically. Once you are using the service, you can only choose to opt out after your qualifying income has been below the relevant threshold for three tax years in a row.
£20,000 or less is a permanent exemption
If your qualifying income is £20,000 or less, you are automatically exempt and do not need to use Making Tax Digital for Income Tax. No application, no correspondence — it holds unless your circumstances change.
That is the floor of the whole regime as currently legislated. Below it, you carry on filing an ordinary Self Assessment return.
HMRC writes to you, but the duty is yours
HMRC reviews your Self Assessment return each year and checks your qualifying income. If it is above the relevant threshold, HMRC writes confirming you must start using the service by the beginning of the following tax year.
A letter is not a precondition. HMRC’s guidance is explicit: if you did not receive one, it remains your responsibility to check whether and when you need to use the service, and to be signed up and ready. Postal failures, address changes and returns filed late all create gaps. Use HMRC’s online checking tool rather than waiting for a letter.
To sign up at all you must be registered for Self Assessment and have submitted a tax return in the last two years. You also still file a normal Self Assessment return for the tax year before you start.
Frequently asked questions
Is qualifying income before or after expenses?
Before. Qualifying income is your total income from self-employment and property before expenses — turnover, not profit. A landlord with £55,000 of rent and £30,000 of costs has qualifying income of £55,000.
Does my salary or pension count towards the threshold?
No. Employment (PAYE) income, State Pension, private pensions, dividends and your share of partnership profit as an individual partner are all excluded from qualifying income.
Which tax year decides whether I’m in from April 2027?
Your 2025/26 return — the one due by 31 January 2027. Each threshold is tested against the Self Assessment return you submitted in the previous tax year, not your current trading.
What if my income drops below the threshold after I’ve signed up?
You can choose to opt out once your qualifying income has been below the relevant threshold for three tax years in a row. A single bad year does not release you.
I haven’t had a letter from HMRC — am I safe to ignore MTD?
No. HMRC writes to people it identifies as above the threshold, but its guidance is clear that it remains your responsibility to check whether and when you need to use the service, and to be signed up in time.
Working out where you stand
The threshold test is arithmetic, but the inputs are not obvious — gross rather than net, two income streams combined, a lookback year that has already closed, and a set of exclusions that quietly move people in and out. The expensive mistake is discovering in August that you were mandated in April and have no digital records for the first quarter.
SmartFiling handles MTD for Income Tax and Self Assessment on a fixed fee, including checking your qualifying income, signing you up, and running quarterly updates and your year-end return. Every submission is reviewed by an ICAEW Chartered Accountant, turnaround is three weeks, and the whole thing is handled online.
