The MTD income threshold determines who must comply with Making Tax Digital for Income Tax. From 6 April 2026, individuals with gross income over £50,000 must use MTD. From 6 April 2027, the threshold drops to £30,000. A further reduction to £20,000 is planned but not yet confirmed.
This guide explains how thresholds work, what counts as qualifying income, and how combined income sources affect your obligations.
MTD Threshold Timeline
| Start Date | Gross Income Threshold | Who Must Comply | |------------|----------------------|-----------------| | 6 April 2026 | Over £50,000 | ~780,000 taxpayers | | 6 April 2027 | Over £30,000 | ~1.8 million additional | | TBC (likely 2028) | Over £20,000 | Further expansion |
These thresholds apply to self-employed individuals and landlords with qualifying income.
Gross Income, Not Profit
The most important concept: MTD thresholds are based on gross income, not profit.
What is Gross Income?
Gross income means your total business receipts before deducting any expenses:
| Gross Income Includes | Gross Income Does NOT Include | |----------------------|------------------------------| | All sales revenue | Business expenses | | Client payments | Cost of goods sold | | Rental income received | Mortgage payments | | Tips and gratuities | Equipment purchases | | Grants and subsidies | Professional fees | | Commission income | Travel costs |
Why This Matters
Example: High Turnover, Low Profit
| Item | Amount | |------|--------| | Business income (gross) | £75,000 | | Business expenses | £45,000 | | Profit | £30,000 |
Despite making only £30,000 profit, this person must comply with MTD from April 2026 because gross income exceeds £50,000.
Example: Lower Turnover, Higher Profit
| Item | Amount | |------|--------| | Business income (gross) | £45,000 | | Business expenses | £8,000 | | Profit | £37,000 |
This person does NOT need MTD until April 2027 (when the £30,000 threshold applies), despite making more profit than the first example.
Qualifying Income Sources
Self-Employment Income
All trading income from self-employment counts towards the threshold:
- Freelance earnings
- Sole trader business receipts
- Contract/consulting income
- Gig economy earnings (Uber, Deliveroo, etc.)
- Online selling (if trading, not occasional sales)
Property Income
All rental income counts towards the threshold:
- Buy-to-let rent
- Airbnb and short-term rental income
- Room rental (if above Rent a Room £7,500 threshold)
- Commercial property rent
- Holiday let income
What Does NOT Count
These income sources do NOT count towards the MTD threshold:
| Income Type | Reason | |-------------|--------| | Employment salary (PAYE) | Taxed at source | | Pension income | Taxed at source | | Dividends | Different reporting system | | Bank interest | Taxed via Personal Savings Allowance | | Capital gains | Separate CGT rules |
MTD for Income Tax focuses on self-assessment income that isn't taxed at source.
Combined Income Rules
If you have multiple qualifying income sources, they're added together:
Self-Employment + Property
| Income Source | Gross Amount | |---------------|--------------| | Freelance business | £35,000 | | Rental property | £20,000 | | Combined total | £55,000 |
This person must comply from April 2026 (combined income over £50,000), even though neither source alone exceeds the threshold.
Multiple Self-Employments
If you run multiple businesses as a sole trader:
| Business | Gross Income | |----------|--------------| | Consulting business | £28,000 | | Online store | £15,000 | | Photography side business | £12,000 | | Combined total | £55,000 |
All self-employment income combines—this person must comply from April 2026.
Multiple Rental Properties
All rental income is already treated as one property business, so properties naturally combine:
| Property | Gross Rent | |----------|------------| | Property 1 | £18,000 | | Property 2 | £15,000 | | Property 3 | £22,000 | | Combined total | £55,000 |
Which Tax Year Determines Compliance?
Your qualifying income from the previous tax year determines whether you must use MTD.
For April 2026 Start
Your 2024/25 income (6 April 2024 – 5 April 2025) determines if you comply from April 2026:
| 2024/25 Gross Income | MTD from April 2026? | |---------------------|---------------------| | Over £50,000 | Yes, must comply | | Under £50,000 | No (unless 2025/26 exceeds £50,000) |
If your income rises above £50,000 during 2025/26, you'll join MTD from April 2026 based on that year's income.
For April 2027 Start
Your 2025/26 income determines if you comply from April 2027:
| 2025/26 Gross Income | MTD from April 2027? | |---------------------|---------------------| | Over £50,000 | Already in MTD from 2026 | | £30,001 – £50,000 | Yes, must comply | | Under £30,000 | No (unless income rises) |
Threshold Examples
Example 1: Clear First Wave
Sophie: Graphic Designer
- 2024/25 gross income: £62,000
- Expenses: £12,000
- Profit: £50,000
Result: Gross income exceeds £50,000. Sophie must comply with MTD from 6 April 2026.
Example 2: Clear Second Wave
Tom: Part-Time Consultant
- 2024/25 gross income: £38,000
- Expenses: £6,000
- Profit: £32,000
Result: Gross income is between £30,000 and £50,000. Tom must comply with MTD from 6 April 2027.
Example 3: Combined Income
Emma: Employed with Side Business and Rental
- Employment income: £45,000 (PAYE—doesn't count)
- Freelance income: £28,000 (counts)
- Rental income: £24,000 (counts)
- Qualifying income: £52,000
Result: Combined self-employment and property income exceeds £50,000. Emma must comply from 6 April 2026.
Example 4: Below Threshold
James: New Freelancer
- 2024/25 gross income: £25,000
- Expenses: £3,000
- Profit: £22,000
Result: Gross income below £30,000. James does not need MTD until the threshold potentially drops to £20,000 (or his income increases).
Example 5: Rising Income
Lucy: Growing Business
- 2024/25 gross income: £42,000 (below £50,000)
- 2025/26 gross income: £58,000 (above £50,000)
Result: Lucy didn't qualify based on 2024/25, but her 2025/26 income exceeds £50,000. She must comply from 6 April 2026 based on her qualifying income that year.
Fluctuating Income
Income Rises Above Threshold
If your income rises above the current threshold, you must join MTD from the following April.
Example:
- 2025/26: £48,000 (below £50,000 threshold)
- 2026/27: £53,000 (above £50,000 threshold)
- Result: Must join MTD from 6 April 2027
Income Falls Below Threshold
If your income drops below the threshold for two consecutive tax years, you can leave MTD.
Example:
- 2026/27: £55,000 (in MTD)
- 2027/28: £45,000 (below £50,000)
- 2028/29: £42,000 (below £50,000 for second year)
- Result: Can leave MTD from 6 April 2029
Note: As thresholds are dropping, leaving MTD becomes less likely over time.
Near the Threshold: What to Do
If your income is close to a threshold, consider:
If Just Under £50,000
- Don't artificially suppress income—HMRC may investigate
- Prepare anyway—income may rise, and the £30,000 threshold is coming
- Consider voluntary MTD—get ahead of requirements
If Just Over £50,000
- You must comply—no choice if above threshold
- Legitimate expense claims may reduce profit (not gross income)
- Start preparing now—deadlines are approaching
Voluntary MTD
You can join MTD voluntarily even if below the threshold. Benefits:
- Learn the system without pressure
- Quarterly visibility of your tax position
- No penalty if you make mistakes while learning
How HMRC Knows Your Income
HMRC has multiple data sources:
| Source | What They See | |--------|---------------| | Self Assessment returns | Your declared gross income | | Bank data | Transaction patterns (not direct access yet) | | Letting agent reports | Rental income reported to HMRC | | Third-party platforms | Airbnb, eBay, Etsy, Uber, Deliveroo reports | | Property records | Land Registry data on ownership |
From 2024, digital platforms must report seller/host income to HMRC, making it easier to identify those above thresholds.
MTD Exemptions
Regardless of income, you may be exempt if:
Digital Exclusion
You cannot use digital tools due to:
- Age
- Disability
- Remote location without internet
- Religious beliefs
Apply to HMRC for an exemption.
Insolvency
Those who are insolvent may be exempt from MTD requirements.
Leaving Self-Employment
If you cease trading or sell all rental properties, you exit MTD.
Planning for Threshold Changes
Current Timeline
| Date | Threshold | Your Action | |------|-----------|-------------| | Now | N/A | Check your gross income | | April 2026 | £50,000 | First wave compliance | | April 2027 | £30,000 | Second wave compliance | | TBC | £20,000 | Further expansion |
Recommendations
If income over £50,000:
- Choose MTD software now
- Set up digital record-keeping
- Practice with current tax year data
If income £30,000-£50,000:
- You have until April 2027
- Start preparing in 2026
- Watch first wave for lessons learned
If income under £30,000:
- No immediate action required
- Stay aware of threshold changes
- Consider voluntary MTD for practice
Summary: Quick Reference
| Your Situation | MTD Start Date | |----------------|----------------| | Gross income over £50,000 | 6 April 2026 | | Gross income £30,001-£50,000 | 6 April 2027 | | Gross income £20,001-£30,000 | TBC (likely 2028+) | | Gross income under £20,000 | Not yet required | | Employment only (PAYE) | MTD doesn't apply | | Properties in limited company | MTD ITSA doesn't apply |
Key points:
- Threshold = gross income, not profit
- Self-employment + property income = combined
- Employment income = doesn't count
- Falling below threshold = need 2 consecutive years to exit
Check Your MTD Status with TaxFolio
TaxFolio helps you understand your MTD obligations:
- Income tracking — see gross income in real-time
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- Combined income view — self-employment + property together
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Start your free 30-day trial and check if you need MTD.