The Making Tax Digital threshold works differently for VAT and for income tax. For VAT, you fall inside the rules once your taxable turnover passes £90,000 over any rolling twelve-month period. For income tax, sole traders and landlords are caught in three waves based on gross qualifying income: above £50,000 from 6 April 2026, above £30,000 from 6 April 2027, and above £20,000 from 6 April 2028. Where you sit against those lines fixes when you must start keeping digital records and reporting through compatible software.
The VAT Threshold
The VAT registration threshold is £90,000 of taxable turnover, measured over a rolling twelve-month period ending at the close of any month.1Legislation.gov.uk. Value Added Tax Act 1994 – Schedule 1 You also become liable to register if you expect your taxable supplies in the next 30 days alone to exceed £90,000. Once you cross that line you must register and start charging VAT. The deregistration threshold is £88,000; if your taxable turnover drops below that, you can apply to cancel your registration.2GOV.UK. Increasing the VAT Registration Threshold
Digital record-keeping is not tied to the registration threshold anymore. Since April 2022, every VAT-registered business has had to keep digital records and file returns through compatible software, whatever the turnover.3GOV.UK. Making Tax Digital for VAT Final Evaluation So if you registered voluntarily while turning over well under £90,000, the digital rules still apply to you. The £90,000 figure decides when registration itself becomes compulsory; once you are registered, digital filing is automatic.
The Income Tax Thresholds
Making Tax Digital for Income Tax phases in for sole traders and landlords over three tax years. The number that matters is your gross qualifying income from self-employment and property combined, measured before any expenses.
- 6 April 2026: mandatory if your qualifying income is above £50,000.4HM Revenue & Customs. Choose the Right Software for Making Tax Digital for Income Tax
- 6 April 2027: extends to income above £30,000.
- 6 April 2028: extends to income above £20,000.5GOV.UK. Making Tax Digital for Income Tax Self Assessment for Sole Traders and Landlords
The underlying power comes from the Finance (No. 2) Act 2017, which allowed HMRC to require digital record-keeping and quarterly reporting. The start date was postponed several times before being fixed at April 2026 for the first wave.
How Qualifying Income Is Worked Out
HMRC looks at gross income, not profit. Qualifying income is the total you receive from self-employment and property before you deduct any expenses.6HM Revenue & Customs. Work Out Your Qualifying Income for Making Tax Digital for Income Tax A freelancer who invoices £55,000 a year but spends £30,000 on materials and overheads still has qualifying income of £55,000. That puts them in the first wave, however thin the profit.
Multiple income sources are added together. Someone earning £25,000 from rental income and £27,000 from a sole trade has qualifying income of £52,000, which crosses the £50,000 threshold for April 2026.6HM Revenue & Customs. Work Out Your Qualifying Income for Making Tax Digital for Income Tax You cannot split income across separate entities to stay below the line. HMRC aggregates everything from self-employment and property into one figure per person.
Jointly owned property is treated differently. You count only your share of the gross rent, not the full amount the property brings in. Your share is then combined with any rent from properties you own outright and any self-employment income to produce your total qualifying figure. One joint owner can therefore be above the threshold while the other stays below it, depending on their respective shares and any other income each one has.
Who Is Not Caught Yet
Partnerships are outside every phase announced so far. HMRC has said partnerships will eventually need to use Making Tax Digital for Income Tax but has not published a start date.7HM Revenue & Customs. Find Out if and When You Need to Use Making Tax Digital for Income Tax If you are a partner in a general partnership, the partnership itself has no digital filing obligation yet. Any personal income you have from a sole trade or rental property still counts toward your own qualifying income, though, and can pull you into the rules as an individual.
Limited companies are also outside these income tax thresholds. The £50,000, £30,000, and £20,000 lines relate to sole traders and landlords reporting through Self Assessment. Company profits sit in a separate corporation tax regime that is not part of this rollout.
Exemptions for the Digitally Excluded
Some people can apply for an exemption if it is genuinely not practical for them to use digital tools. HMRC calls this being digitally excluded. The main qualifying reasons are a health condition or disability that prevents you from using a computer or smartphone, membership of a religious group whose beliefs are incompatible with digital communications, and living somewhere without reliable internet access.8GOV.UK. Find Out if You Can Get an Exemption from Making Tax Digital for Income Tax
Exemption is not automatic. You must apply to HMRC and show why you cannot comply, and until HMRC approves your application you remain subject to the standard rules. HMRC has said explicitly that several common arguments do not qualify: previously filing paper returns, finding the software too expensive, or having only a small number of transactions.8GOV.UK. Find Out if You Can Get an Exemption from Making Tax Digital for Income Tax Businesses in insolvency proceedings may also receive a temporary reprieve, decided case by case.
Checking Your Position
To place yourself against the thresholds, add up your gross self-employment income and your gross property income for the tax year. Do not subtract expenses, and do not net off losses from one source against another. Include only your share of any jointly held property. If the total sits above £50,000, plan for April 2026. Between £30,000 and £50,000, your date is April 2027. Between £20,000 and £30,000, April 2028. Below £20,000, you are outside the mandatory rules as they currently stand, though you can sign up voluntarily.9HM Revenue & Customs. Sign Up for Making Tax Digital for Income Tax For VAT, the check is simpler: look at your rolling twelve-month taxable turnover against £90,000, and check your next-30-day expectation against the same figure.