Qualifying income for Making Tax Digital: what counts
Qualifying income for Making Tax Digital (MTD) for Income Tax is the total of your self-employment and property income before expenses, so it is measured on turnover, not profit. Wages, pensions, dividends and your profit share from a partnership are left out, and HMRC uses the figure on your Self Assessment return for an earlier tax year to decide when you must start.
What qualifying income means
You add together the gross income from every self-employment and every property business you have. Nothing is deducted for expenses, allowances or tax.
HMRC works the figure out from your Self Assessment return, but GOV.UK says you should check it yourself too. If you are over the threshold, the rules apply to you even if no letter arrives.
Turnover, not profit
People often ask whether the MTD threshold is gross or net. It is gross: the money that comes in before you take off any costs.
Example: a sole trader has turnover of £34,000 and allowable expenses of £21,000, so their profit is £13,000. Their qualifying income is £34,000, not £13,000.
If you use the cash basis and are VAT registered, you can choose whether to include VAT in your business income. If you include it, the VAT counts towards your qualifying income.
What counts towards qualifying income
- Income from self-employment as a sole trader, across all your trades
- Income from UK property, plus foreign property if you were UK tax resident
- Your share of income from a property you own jointly
- Property or trading income you are entitled to as a beneficiary of a bare trust
- Property or trading income from an interest in possession trust that is paid straight to you rather than through the trustees
- Income taxed as trading profit under the transactions in UK land rules, where it carries on across more than one tax year
- Disguised investment management fees and income-based carried interest
- Your own self-employment or property income that a partnership reports to you
- Income from a source that has stopped since your last return, as long as you still have another self-employment or property source
What does not count
- Employment income taxed through PAYE
- The State Pension and private pensions
- Dividends, including dividends from your own company
- Your share of profit as an individual partner in a partnership (it still goes on your tax return)
- Transition profits from basis period reform
- Qualifying care relief received by foster carers, kinship carers and similar carers
- A one-off transaction in UK land that falls within a single tax year
- Income from UK Real Estate Investment Trusts (REITs) and Property Authorised Investment Funds (PAIFs)
Averaging relief, used by some farmers and creative artists, does not change your qualifying income. Having any of the income above does not take you out of MTD if your self-employment and property income is over the threshold on its own.
Jointly owned property: count your share
If you own a rental property with someone else, only your share of the income counts. GOV.UK gives the example of siblings who share £50,000 of rent equally: each has qualifying income of £25,000.
If you only find out your share after expenses have already been taken off, HMRC will use that after-expenses figure.
Example: a couple let a flat for £36,000 a year and split it equally. Each has £18,000, which is under £20,000. If one of them also earns £6,000 from a side business, their qualifying income becomes £24,000.
Foreign property and tax residence
If you were UK tax resident, your self-employment income and both UK and overseas property income count. A UK sole trader who also lets a flat in France would add the two together.
If you were not UK tax resident, only your UK property income and any self-employment income declared on your UK return count. Foreign property income, and self-employment income not declared in the UK, are left out.
If your return includes the SA109 residence pages, you may be exempt for 2026 to 2027. Our guide to MTD exemptions explains how that works.
Which tax year sets your start date
Each start date is based on your qualifying income for a tax year that ends a year before you start:
- Over £50,000 in 2024 to 2025: you should have started on 6 April 2026
- Over £30,000 in 2025 to 2026: you start on 6 April 2027
- Over £20,000 in 2026 to 2027: you start on 6 April 2028
The test is more than the threshold. GOV.UK treats qualifying income of £20,000 or less as exempt, so exactly £20,000 does not bring you in. See MTD if you earn under £20,000 for more.
If you only traded for part of a year, HMRC will scale a sole trader's income up to a full year where it has the information, so 6 months of trading is doubled. For property income, you need to do this scaling yourself.
Changes to your return matter too. A change made before a tax year starts can bring you in or take you out for that year. A change made after the year starts can take you out, but cannot bring you in for that year.
Worked examples
Example 1: Priya earns a £40,000 salary and lets a flat for £14,400 a year in 2025 to 2026. Her salary is ignored, so her qualifying income is £14,400 and she does not need MTD from April 2027.
Example 2: Tom is a plumber with turnover of £31,500 and profit of £18,000 in 2025 to 2026. His qualifying income is £31,500, which is over £30,000, so he starts on 6 April 2027.
Example 3: Sam is retired, with £22,000 a year from pensions. In 2026 to 2027 Sam has £8,000 of rent and £13,000 of sales from a craft business. The pensions are ignored, but £21,000 is over £20,000, so Sam starts on 6 April 2028.
You can test your own figures with our free MTD checker or HMRC's tool on GOV.UK.
If your income falls later
Once you are using MTD, you can choose to opt out if your qualifying income stays below the relevant threshold for 3 tax years in a row. You can also opt out if you amend the previous year's return and it takes you below the threshold. The details are on GOV.UK.
Keeping the records with Snapfile
Snapfile lets you send photos of receipts and invoices, PDFs or texts on WhatsApp. It records them, assigns HMRC expense categories, tracks the tax year and quarter, and exports a CSV. It does not submit anything to HMRC. It is free during early access, with a Pro plan planned at £9.99 a month.
Common questions
Is MTD based on turnover or profit?
Turnover. Qualifying income is your self-employment and property income before any expenses are taken off, so a business with £34,000 of sales and £13,000 of profit has qualifying income of £34,000.
Is the MTD threshold gross or net?
Gross. The only exception GOV.UK mentions is jointly owned property where you are only told your share after expenses, in which case HMRC uses that figure.
Does a pension count as qualifying income for MTD?
No. The State Pension and private pensions do not count, and neither do wages, dividends or a partnership profit share. Only self-employment and property income is added up.
How do joint property owners work out qualifying income for MTD?
Each owner counts only their own share of the rental income. Two people sharing £50,000 of rent equally would each have £25,000 of qualifying income.
Does foreign rental income count towards the MTD threshold?
It counts if you were UK tax resident. If you were not UK tax resident, foreign property income is left out and only UK property income and self-employment income declared on your UK return count.
Sources: GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax; GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax; GOV.UK: Find out if you can get an exemption from Making Tax Digital for Income Tax; GOV.UK: Use Making Tax Digital for Income Tax: If your circumstances change; GOV.UK: Sign up for Making Tax Digital for Income Tax. This is general information, not tax advice; check GOV.UK or an accountant for your situation.
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