Making Tax Digital for Income Tax / Lesson 2 of 7
Working out your qualifying income
The number that decides whether MTD applies to you is not your profit.
The short answer
- ✓ Qualifying income is gross self-employment plus property income, before expenses
- ✓ Employment, dividends, savings and pension income do not count
- ✓ Self-employment and property combine for the threshold but are reported separately
- ✓ The test uses a previous year's filed figures, not the current year
The number that matters
Whether MTD applies to you is decided by your qualifying income. That is the combined gross income from self-employment and property, before any expenses are deducted.
This catches people out constantly, because almost every other threshold in UK tax works on profit. This one does not.
Self-employed turnover £34,000
Rental income received £19,000
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QUALIFYING INCOME £53,000
Expenses of £21,000 are irrelevant to this test.
Profit might only be £32,000. The test still uses £53,000.What counts, and what does not
| Income | Counts towards qualifying income? |
|---|---|
| Sole trader turnover | Yes, gross |
| UK property rental income | Yes, gross |
| Overseas property income | Yes, gross |
| Employment income through PAYE | No |
| Dividends | No |
| Savings interest | No |
| Pension income | No |
| Partnership profit share | Not in the current phases |
So an employee earning a large salary with a small side business is measured only on the side business. A landlord with three modest properties may be measured on more than their profit suggests.
Two income sources, one test
If you have both self-employment and property income, they are added together for the threshold test. Someone with £28,000 of freelance turnover and £26,000 of rent is well inside scope even though neither source alone would be.
Once you are in, you keep separate records for each. Self-employment and property are reported as distinct businesses, with their own quarterly updates. Combining them for the threshold and separating them for reporting is not intuitive, and it is exactly how the rules work.
The bit HMRC does not spell out
Your qualifying income is assessed on a previous tax year's figures, not the year you are currently in. That means you can find out that you are in scope for a year that has already started, based on a return you filed months ago. It also means a single unusually good year can pull you in even if your income falls back afterwards.
The practical implication: look at the return you have just filed, not at how this year feels. That filed figure is the one HMRC is using.
Common mistakes
- Testing against profit. Qualifying income is gross, before expenses.
- Forgetting to add property to self-employment. They combine for the test.
- Including salary or dividends. Neither counts.
- Judging by the current year. The assessment uses an earlier year's filed figures.
Try it on your own numbers
This is the same calculator as the full tool page, using 2026/27 rates.
Are you affected by MTD for Income Tax?
Enter your gross income (turnover/rent before expenses) - that's what HMRC counts.
HMRC adds your gross self-employment and property income together - not your profit.
Your result
What it means
What to do
Qualifying income is tested on your previous tax year's return, so a future threshold can pull you in even if this year is lower.
When does MTD for Income Tax apply?
It's phased in by income. Your band is highlighted.
| Qualifying income | Mandatory from | First tax year |
|---|---|---|
Under £20,000: not yet mandated - the government has said it will keep this under review. General partnerships are expected to join later.
Your MTD deadlines
From the tax year onwardNext deadline
What you submit each quarter
A cumulative summary of your business and property income and expenses, using MTD-compatible software. You get a running estimate of the tax due - but you don't pay until the normal Self Assessment date.
Late quarterly updates earn points under HMRC's points-based penalty system; enough points trigger a £200 penalty.
| Submission | Period covered | Deadline | Countdown |
|---|---|---|---|
Standard quarterly periods shown (you can elect calendar-quarter dates instead). The Final Declaration replaces the old Self Assessment return and is due 31 January after the tax year ends.
Create a free account to save these deadlines and get reminders.
What will MTD cost you?
You must use MTD-compatible software. Typical routes:
Some software is free for the simplest landlords/sole traders. Check HMRC's recognised-software list before you buy.
Key takeaways
- ✓ Qualifying income is gross self-employment plus property income, before expenses
- ✓ Employment, dividends, savings and pension income do not count
- ✓ Self-employment and property combine for the threshold but are reported separately
- ✓ The test uses a previous year's filed figures, not the current year
Check you have got it
3 quick questions. No score is kept, and you can change your mind.
1. Your turnover is £34,000 and your expenses are £21,000. What figure counts towards qualifying income?
2. You earn £45,000 in a PAYE job and have £12,000 of freelance turnover. What is your qualifying income?
3. You have both freelance income and rental income. How are they treated?
Sources
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