What is the MTD for Income Tax threshold?

The MTD for Income Tax threshold determines when a taxpayer is brought into Making Tax Digital for Income Tax. If your qualifying income is above the relevant threshold for the relevant tax year, you will need to use MTD from the corresponding start date.

For practical planning, the MTD for Income Tax threshold currently operates in phases. If your qualifying income for 2024 to 2025 is more than £50,000, the regime starts for you from 6 April 2026. If your qualifying income for 2025 to 2026 is more than £30,000, it starts from 6 April 2027. If your qualifying income for 2026 to 2027 is more than £20,000, it starts from 6 April 2028. :contentReference[oaicite:1]{index=1}

What income counts towards the MTD threshold?

This is where many misunderstandings arise. The MTD for Income Tax threshold uses qualifying income. In HMRC’s guidance, qualifying income for this purpose comes from self-employment and property, and it is measured before expenses are deducted. HMRC also says income from ceased self-employment or property sources can still count when working out whether you cross the threshold. :contentReference[oaicite:2]{index=2}

Gross income, not profit

A common error is to look at taxable profit. The MTD for Income Tax threshold does not use profit as the starting point. It uses gross qualifying income. That distinction matters because a landlord or sole trader may have profit well below £50,000 but still cross the threshold if their gross receipts are above it. :contentReference[oaicite:3]{index=3}

It is not per property or per business

Another common mistake is to look at each property or each trade separately. The MTD for Income Tax threshold is based on your total qualifying income across all relevant sources. For example, if you have two rental properties and one sole trade, you should look at the combined total of the qualifying income from all of them. HMRC’s agent guidance reflects this combined-income approach. :contentReference[oaicite:4]{index=4}

Check your eligibility on our MTD checker by clicking the link below.

Examples of when MTD may or may not apply

Example 1: sole trader only

A sole trader with gross self-employment income of £52,000 for 2024/25 is above the MTD for Income Tax threshold for the first phase and is likely to need to use MTD from 6 April 2026. :contentReference[oaicite:5]{index=5}

Example 2: landlord and sole trader combined

A landlord with property income of £28,000 and self-employment income of £24,000 has combined qualifying income of £52,000. The total is above the first threshold, so MTD is likely to apply from April 2026. :contentReference[oaicite:6]{index=6}

Example 3: employment income does not change the result

Someone with salary of £80,000 and property income of £18,000 is not brought in by that salary. Employment income does not count towards the threshold. On those facts alone, they would not cross the first threshold from the property income. HMRC’s qualifying-income guidance makes clear that the threshold is based on self-employment and property income, not other categories of personal income. :contentReference[oaicite:7]{index=7}

What changes once you are above the threshold?

Crossing the MTD for Income Tax threshold does not simply mean “file more tax returns”. It means a change in process. HMRC’s published material describes MTD as requiring digital records and quarterly updates through compatible software, followed by year-end obligations. :contentReference[oaicite:8]{index=8}

Quarterly updates are not the same as quarterly tax payments

This point matters for both SEO and trust, because it is one of the biggest user questions. HMRC guidance describes quarterly updates as reporting obligations. They do not, by themselves, mean your income tax becomes payable quarterly under an entirely new payment system. :contentReference[oaicite:9]{index=9}

Do you need Xero or QuickBooks?

Not necessarily. HMRC requires compatible software for digital records and submissions, but that does not mean every taxpayer needs the same premium software package. HMRC’s compatible-software guidance recognises a range of software approaches, including software that can import bank transactions, scan invoices, or support digital record-keeping workflows. :contentReference[oaicite:10]{index=10}

For some taxpayers, especially straightforward landlords and sole traders, the right answer is not “buy the most expensive software”. The right answer is to choose a compliant and proportionate method.

How to prepare if you may be above the threshold

If you think you may exceed the MTD for Income Tax threshold, a sensible preparation route is:

• confirm which income sources count
• work out total gross qualifying income
• review whether any ceased sources still affect the test
• choose a digital record-keeping method
• prepare for quarterly submissions and year-end steps

HMRC also notes that once you start using the service, if your qualifying income drops below the threshold for three tax years in a row, you can choose to opt out. That is useful context for clients who worry that crossing the threshold once traps them permanently. :contentReference[oaicite:11]{index=11}

Conclusion

The MTD for Income Tax threshold is the first test landlords and sole traders need to understand. It is based on combined gross qualifying income from self-employment and property, not on profit, and not on each property or trade looked at separately.

If you want to check your position quickly, use Harkia’s MTD checker. If you want to see likely fees, visit the quote page. If you want broader guidance, visit the main MTD for Income Tax page.

Frequently asked questions