Making Tax Digital
Qualifying income for Making Tax Digital
The figure that decides MTD is your takings before costs, not the profit you pay tax on.
Qualifying income for Making Tax Digital is your self-employment turnover plus your share of gross rents, both taken before any expense, as shown on the previous year’s Self Assessment return. A van driver with £26,000 of delivery fees and £9,000 of rent from a buy-to-let has £35,000 of qualifying income: over the £30,000 test for 2025/26, so MTD applies from 6 April 2027, even if fuel, insurance and mortgage interest leave a much smaller profit. Each business is counted, including one that closed during the year if another carries on. Employment income, dividends, State and private pensions and a share of partnership profit are not counted. HMRC scales a short first year of trading up to twelve months, and once you are in, 3 years in a row under the threshold let you leave. Enter turnover and rents to compare them with each year’s threshold.
Your qualifying income for Making Tax Digital
Qualifying income
£35,000
| Threshold for that year | £30,000 |
| Result | MTD from 6 April 2027 |
| Not counted | wages, dividends, pensions, partnership shares |
Figures checked by Radif Partners · Editorial policy · How we calculate
Gross takings, not the profit on your tax bill
Most self-employed people think in terms of profit, because that is what Income Tax and Class 4 are charged on. MTD ignores it. HMRC adds the turnover of each self-employment to the gross rents of each property business and compares the total with the threshold for that year. Two traders with identical profit can therefore be treated very differently:
| Example | Turnover | Profit | Rent share | Qualifying income | MTD from |
|---|---|---|---|---|---|
| Hair salon owner | £61,000 | £23,000 | £0 | £61,000 | 6 April 2026 |
| Freelance copywriter | £29,000 | £26,500 | £0 | £29,000 | 6 April 2028 |
| Childminder with a let flat | £14,000 | £10,000 | £8,400 | £22,400 | 6 April 2028 |
| Online reseller | £33,000 | £12,000 | £0 | £33,000 | 6 April 2027 |
The reseller and the copywriter end up with similar profits, yet the reseller’s stock purchases do nothing to lower the figure MTD looks at. Businesses with heavy costs, such as builders, retailers and couriers, cross the line much sooner than their profit suggests.
Income that is left out
Only trading and property income counts. Wages taxed through PAYE, dividends (including those paid by your own company), the State Pension and private pensions are all outside the figure, and so is a share of profit from a partnership in which you are an individual partner. That partnership income still goes on your return, through the software, but you do not keep digital records or send updates for it. Several narrower items are also excluded: transition profits spread over five years after the basis period reform, qualifying care relief received by foster and kinship carers, distributions from UK REITs and property authorised investment funds, and a one-off profit from dealing in UK land that does not continue into another year.
A VAT-registered trader on the cash basis may declare income with or without VAT. If the return includes VAT, that VAT is part of qualifying income too, which can be enough to tip someone just under a threshold over it.
Closed businesses and corrected returns
A source that stopped still counts if another one carries on. A self-employed physiotherapist who sold a rental flat in the basis year keeps that year’s rent in the total because the trade continues. If every self-employment and property source had ended before 6 April 2026, MTD does not apply; telling HMRC before it signs you up based on old figures saves a correction later. Amending a return also matters. A change made before the tax year begins can bring you in or take you out for that year. A change made after it begins can take you out, but cannot bring you in for that year.
Living abroad, or with income abroad
For someone who was UK resident in 2024/25, foreign rents count alongside UK turnover: a UK sole trader letting a flat in France adds both. For a non-resident, only UK property income and self-employment income declared on the UK return are counted. People who file the SA109 residence pages should also read the exemptions on the main MTD page, since filing those pages brought a temporary exemption for 2026/27.
Falling back under the line
Dropping below the threshold once does not take you out. You may opt out after 3 consecutive tax years under the relevant figure, or keep using the service voluntarily. Someone who moves into a job and keeps a little freelance work alongside it can check the effect on the bill with the job plus self-employment calculator.