Making Tax Digital if you earn under £20,000
If your qualifying income from self-employment and property is £20,000 or less, you do not need to use Making Tax Digital (MTD) for Income Tax: GOV.UK treats you as automatically exempt. You still have to send a Self Assessment tax return if you would normally need one, and you can choose to sign up for MTD voluntarily.
The short answer
MTD for Income Tax is coming in three stages. The lowest threshold GOV.UK has set is £20,000:
- Over £50,000 in 2024 to 2025: from 6 April 2026
- Over £30,000 in 2025 to 2026: from 6 April 2027
- Over £20,000 in 2026 to 2027: from 6 April 2028
The test is more than the threshold, so qualifying income of exactly £20,000 is still exempt. When we checked GOV.UK on 27 October 2026, HMRC had not announced any threshold below £20,000 or any date for bringing in people under it.
What 'earning under £20,000' actually means
This is where many people go wrong. The £20,000 is not your profit and not your total income. It is your qualifying income: the turnover from all your self-employment and property businesses added together, before expenses.
Example: a dog groomer has turnover of £24,000 and profit of £9,000. Their profit is well under £20,000, but their qualifying income is £24,000, so they are over the threshold.
Wages, pensions, dividends and a partnership profit share are left out. Example: someone with a £45,000 salary and £9,000 a year of rent has qualifying income of £9,000, so they are under £20,000.
If you own a rental property jointly, only your share counts. Our guide to qualifying income covers the full list of what counts and what doesn't.
What still applies to you: Self Assessment
Being outside MTD does not mean you stop dealing with HMRC. You keep filing a Self Assessment return in the usual way, and keep records that support it.
GOV.UK says you must send a return if, for example, you were a self-employed sole trader and earned more than £1,000 before reliefs. Rental income can also mean you need to file. You can check on GOV.UK.
- Paper returns are due by 31 October after the tax year ends
- Online returns are due by 31 January after the tax year ends
- Any tax owed is due by 31 January, with a second payment on account deadline of 31 July if that applies to you
Under the current Self Assessment rules, a late return means an initial £100 penalty, with further penalties after 3, 6 and 12 months. HMRC's MTD penalties guidance also says that from April 2027 the new points-based penalties will apply to everyone who sends a personal Self Assessment return, so check the rules for the year you are filing. Our MTD penalties guide explains the new system.
Can you sign up voluntarily?
Yes. GOV.UK says you can sign up before you are required to, for the current tax year or the next one.
Volunteers do the same things as everyone else in MTD: keep digital records, send quarterly updates and file the return through compatible software. To sign up you need to be registered for Self Assessment and have sent a return in the last 2 years.
The penalty rules for volunteers are different:
- You get no penalties for missing quarterly update deadlines while you are volunteering
- Each late tax return earns a point, and reaching 2 points means a £200 penalty
- You must agree to the new penalty rules when you sign up, and you cannot switch back, even if you later stop volunteering
Volunteering can be useful practice if you expect your turnover to pass £20,000. If you are comfortably below it, think about whether being locked into the new penalties is worth it. The full rules are on GOV.UK, and our guide on how to sign up for MTD walks through the steps.
What happens if your income rises above £20,000
HMRC reviews your Self Assessment return each year. If your qualifying income goes over the threshold, it will write to confirm that you need to start using MTD from the start of the following tax year.
Example: a landlord's 2026 to 2027 return shows rent of £23,000. That is over £20,000, so they would need to use MTD from 6 April 2028.
A missing letter does not get you off the hook. GOV.UK says it is your responsibility to check, so it is worth running your figures through our free MTD checker or HMRC's own tool once each return is done.
If you are likely to cross the line, get ready early. You will need compatible software, and you will need to keep digital records from the first day of the tax year you start. Our guide to record keeping for sole traders and landlords is a good starting point.
If you were in MTD and your income has dropped
Falling below £20,000 for one year does not take you straight out. Once you are using MTD, you can opt out if your qualifying income stays below the relevant threshold for 3 tax years in a row.
GOV.UK gives this example: someone who started in April 2026 can opt out after the end of 2028 to 2029 if their qualifying income is £20,000 or less on their 2026 to 2027 return, their 2027 to 2028 return, and their fourth quarterly update for 2028 to 2029. They would then not need MTD for 2029 to 2030.
The opt-out option appears in your HMRC online services account only when you are eligible. You can also stay in voluntarily if you prefer.
Keeping the records with Snapfile
Snapfile lets you send receipts and invoices on WhatsApp as photos, PDFs or texts. It records them, assigns HMRC expense categories, tracks the tax year and quarter, logs mileage and sends deadline reminders, then exports a CSV. It does not submit to HMRC. It is free during early access, with a Pro plan planned at £9.99 a month.
Common questions
Do I need Making Tax Digital if I earn under £20,000?
No, not at present. If your qualifying income from self-employment and property is £20,000 or less, GOV.UK says you are automatically exempt, but you still file a Self Assessment return if you normally need to.
Is the £20,000 MTD threshold based on profit?
No. It is based on turnover, meaning your self-employment and property income before expenses. A business with £24,000 of sales and £9,000 of profit is over the threshold.
Will the MTD threshold go below £20,000?
HMRC has not said. As at 27 October 2026, GOV.UK sets out thresholds of £50,000, £30,000 and £20,000 only, with no lower threshold or later date announced.
Can I join MTD voluntarily if I earn less than £20,000?
Yes, you can sign up voluntarily. You will not get penalties for late quarterly updates while volunteering, but you must accept the new penalty rules for late returns and payments, and you cannot go back to the old ones.
Do I still need to do a tax return if I'm under the MTD threshold?
Yes, if you meet the normal Self Assessment rules, for example as a sole trader earning more than £1,000. Being outside MTD only means you do not have to send quarterly updates through software.
Sources: GOV.UK: Find out if you can get an exemption from 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: Work out your qualifying income for Making Tax Digital for Income Tax; GOV.UK: Making Tax Digital for Income Tax Self Assessment: reducing the mandation threshold from £30,000 to £20,000 from April 2028; GOV.UK: Sign up for Making Tax Digital for Income Tax; GOV.UK: Penalties for Making Tax Digital for Income Tax volunteers; GOV.UK: Penalties for Making Tax Digital for Income Tax; GOV.UK: Use Making Tax Digital for Income Tax: If your circumstances change; GOV.UK: Self Assessment tax returns; GOV.UK: Check if you need to send a Self Assessment tax return; HMRC Developer Hub: Income Tax (MTD) end-to-end service guide, Customers and agents preparing for MTD. This is general information, not tax advice; check GOV.UK or an accountant for your situation.
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