MTD qualifying income: what counts towards the threshold
Short answer: Qualifying income is your total self-employment and property income before expenses, so turnover and gross rent, not profit. Wages, pensions and dividends do not count. If you have a job and a side business, only the side business income counts towards the Making Tax Digital threshold.
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Gross, not profit
GOV.UK says qualifying income is your income from self-employment and property before you take off expenses. A business with high turnover but low profit can still be over the threshold.
HMRC takes the figure from the Self Assessment return you filed for an earlier tax year. GOV.UK also says it is your responsibility to check if and when you need to use MTD, even if HMRC has not written to you.
What counts
Add these together:
- Self-employment income, from all your businesses.
- Property income, from all your properties. For UK tax residents this includes UK and foreign property.
- Your share of jointly owned property income.
- Personal self-employment or property income that a partnership tells you about.
Self-employment and property are one pot. You do not test them separately.
GOV.UK also lists a few less common items that count, such as income paid directly to you from certain trusts and, if you use the cash basis and choose to include it, VAT. Read the full list on the GOV.UK qualifying income page.
What does not count
| Income | Counts? |
|---|---|
| Employment income (PAYE wages) | No |
| Your share of partnership profit as an individual partner | No |
| Dividends, including from your own company | No |
| State Pension and private pensions | No |
| One-off UK land transactions within a single tax year | No |
| Qualifying care relief for foster or kinship carers | No |
Savings interest is not self-employment or property income, so it is not part of the figure either.
A partner still reports their partnership profit on their tax return. They do not need digital records or quarterly updates for it. See MTD for sole traders and landlords with several sources if you also have other income.
Jointly owned property: only your share
If you own a property with someone else, your share of the income counts, not the whole rent. GOV.UK gives an example of £50,000 of joint income split equally, which is £25,000 for each owner.
Your share of the rent is what matters. GOV.UK says that if you only receive your share after expenses, that net figure is used. More detail, including couples who split rent unequally, is on MTD for jointly owned property.
Rent-a-room and the £1,000 allowances
The regulations behind MTD count the income you are required to include in your tax return, before deductions. Rent-a-room income under £7,500, and property or trading income of £1,000 or less, usually does not have to go on a return, so it does not add to your qualifying income. Once you are over those limits and report the income, expect it to count. GOV.UK’s guidance does not spell this out, so if you are near a threshold, check with HMRC. More on MTD and rent-a-room.
Which tax year’s return HMRC uses
HMRC looks at an earlier return, not the current year. GOV.UK sets out these steps:
| Qualifying income over | Taken from your return for | You must use MTD from |
|---|---|---|
| £50,000 | 2024-25 | 6 April 2026 |
| £30,000 | 2025-26 | 6 April 2027 |
| £20,000 | 2026-27 | 6 April 2028 |
So income in the tax year that ended in April 2026 decides whether you start in April 2027. The £30,000 April 2027 guide walks through that group in detail.
If you change a return before a tax year starts, that can bring you in or out of MTD for that year. If you change it after the tax year has started and the change cuts your income below the threshold, you do not need MTD for that year. A change that raises your income after the year has started is not counted for that year.
Worked examples
These are made-up examples with round numbers.
Example: Aisha, an employed nurse with a side business and a rental. Aisha earns £38,000 a year from the NHS. On the side she has £18,000 of self-employment turnover and £14,000 of rent. Her wages do not count. Her qualifying income is £18,000 plus £14,000, which is £32,000. If those were her 2025-26 figures, she would be over £30,000 and would need MTD from 6 April 2027. Her salary being PAYE makes no difference to that.
Example: Tom, a plumber. Tom invoiced £45,000 in the year. After materials, van costs and tools, his profit was £20,000. Qualifying income is £45,000, because it is measured before expenses. If that was his 2025-26 figure, he is in the April 2027 group. If it was his 2024-25 figure, he is over £30,000 but under £50,000, so he was not in the April 2026 group.
Example: Maya, a freelancer with a partnership share. Maya has £12,000 of freelance income and a share of profit from a family partnership. The partnership share does not count. Her qualifying income is £12,000, which is under every threshold.
Example: Leo, who lets a flat with his sister. The flat brings in £40,000 of rent, split equally. Leo’s share is £20,000. He also has £8,000 of self-employment turnover. His qualifying income is £28,000.
If your income drops later
GOV.UK says that once you have started using MTD, you can opt out if your qualifying income falls below the relevant threshold for 3 tax years in a row. A single low year is not enough. HMRC’s legal framework manual describes this as keeping people in for a minimum of four tax years, so a dip does not move you in and out each year.
Separate from the income threshold, you may be exempt for other reasons. GOV.UK says that if your qualifying income is £20,000 or less you are automatically exempt, and you do not need to apply. For digital exclusion and other cases, see MTD exemptions.
If all your self-employment and property income ended before 6 April 2026, GOV.UK says you will not need to use MTD. You still file a return for income you received before it stopped.
Using the figure
Work out your qualifying income from your Self Assessment figures, not from your profit lines. If you are close to a threshold, check your return rather than guessing.
Once you are in, you send cumulative quarterly updates and a final declaration after the year ends. Tools like SendMTD are being built to read your bank statement CSV and prepare the totals. It is not live yet and is not HMRC recognised.
Sources
- Work out your qualifying income for Making Tax Digital for Income Tax
- Find out if and when you need to use Making Tax Digital for Income Tax
- Find out if you can get an exemption from Making Tax Digital for Income Tax
- SALF1440: Exemptions by reference to amount of income (HMRC manual)
- The Income Tax (Digital Obligations) Regulations 2026, regulations 25 and 26
- Rent a Room Scheme
- Tax-free allowances on property and trading income
This guide is general information, not tax or legal advice. Rules can change: check GOV.UK or speak to an accountant about your situation. SendMTD is not affiliated with HMRC.