Am I Affected by Making Tax Digital for Income Tax?
MTD for Income Tax applies to sole traders and landlords whose qualifying income crosses a set threshold. Here's how to work out whether you're in scope, when you need to start, and what you can do if you think you might qualify for an exemption.
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The £50,000 Income Threshold
The starting point for MTD eligibility is whether your qualifying income exceeds the threshold set by HMRC. For the first mandatory wave (April 2026), that threshold is £50,000 per year. For April 2027, it drops to £30,000. A further reduction to £20,000 is planned, though not yet confirmed.
HMRC will assess your eligibility based on the income declared in your most recent Self Assessment return. If your 2024/25 Self Assessment (filed by January 2026) shows income above £50,000, you will need to comply from April 2026.
Importantly, the threshold applies to your gross income — before expenses — not your profit.
What Counts as Qualifying Income?
Only certain types of income count towards the MTD threshold. The two qualifying categories are:
- Self-employment income — your gross income from all sole-trader business activities before deducting expenses
- Property income — gross rental income from UK or overseas property before expenses
The following types of income do not count towards the threshold:
- PAYE employment income
- Dividend income
- Interest from savings and investments
- Pension income
- Capital gains
What If You Have Multiple Income Sources?
If you have income from more than one qualifying source — for example, two separate self-employed businesses, or self-employment plus rental income — HMRC adds them together to assess your threshold position.
For example: if you earn £35,000 as a freelance consultant and £18,000 from renting a property, your combined qualifying income is £53,000 — above the threshold. You would need to comply with MTD from April 2026 even though neither income stream on its own crosses the threshold.
Each income source must be reported separately under MTD — you'll have one set of quarterly updates for your self-employment income and another for your property income.
What If You're Below the Threshold?
If your qualifying income is below £50,000, you are not required to comply with MTD for Income Tax from April 2026. However, you may want to keep an eye on your income if it's close to the threshold — if you cross it in a future tax year, you could become in scope.
You can also choose to sign up voluntarily if you want to get ahead of the changes. Voluntary participation is available and some sole traders find that adopting digital record-keeping early makes the eventual transition much smoother.
Landlord Income and MTD
MTD for Income Tax covers both self-employment and property income. If you are a landlord — whether that's a single buy-to-let property or a larger portfolio — your gross rental income counts towards the MTD threshold.
If you are both a sole trader and a landlord, you'll need to submit quarterly updates for each income stream separately. HMRC treats self-employment and property as distinct reporting categories, so you cannot combine them into a single update.
Full guide: MTD for sole traders with both trading and property incomeExemptions and Deferrals
HMRC recognises that digital record-keeping is not practical for everyone. Limited exemptions are available in the following circumstances:
- You are digitally excluded — for example due to disability, age, or lack of internet access
- Religious or other grounds make it impractical to use digital tools
- You are subject to an insolvency procedure
- Other exceptional circumstances that HMRC may consider on a case-by-case basis
If you believe you qualify for an exemption, you will need to apply directly to HMRC. They will review your circumstances and, if approved, you may be allowed to continue filing paper returns or may be given a deferred start date.
Voluntary Sign-Up
HMRC has made MTD voluntary sign-up available to sole traders ahead of the mandatory dates. If you want to get ahead of the changes — whether to test software, build good habits, or simply avoid a last-minute rush — you can join before you're required to.
Bear in mind that once you sign up voluntarily, you are committing to the quarterly submission schedule. It is not straightforward to withdraw from MTD once enrolled, so make sure your software and record-keeping processes are ready before signing up.
Check Your MTD Eligibility in 2 Minutes
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