The Making Tax Digital for Income Tax threshold is £50,000 of qualifying income from 6 April 2026, falling to £30,000 from April 2027 and £20,000 from April 2028.1GOV.UK. Find Out if and When You Need to Use Making Tax Digital for Income Tax The figure that matters is your gross income from self-employment and property in the tax year before each start date, not your profit and not your total income from every source.
The Three Thresholds and Their Start Dates
HMRC is bringing sole traders and landlords into MTD for Income Tax in three waves. Each wave looks back at a specific tax year to decide whether you are in scope.
- If your qualifying income for the 2024 to 2025 tax year was over £50,000, you must use MTD from 6 April 2026.
- If your qualifying income for the 2025 to 2026 tax year is over £30,000, you must use MTD from 6 April 2027.
- If your qualifying income for the 2026 to 2027 tax year is over £20,000, you must use MTD from 6 April 2028.
The £20,000 level was announced at Spring Statement 2025 and brings around 970,000 more people into scope.2GOV.UK. Reduction of the Mandation Threshold From 30000 to 20000 From April 2028 The underlying law sits in the Finance (No. 2) Act 2017, with the operational rules in the Income Tax (Digital Obligations) Regulations 2026.3GOV.UK. Making Tax Digital Technical Publications
What Counts as Qualifying Income
Qualifying income is your total gross income from self-employment and property in a given tax year. HMRC uses turnover before any business expenses are deducted, not the profit you eventually pay tax on.4GOV.UK. Work Out Your Qualifying Income for Making Tax Digital for Income Tax Run a consultancy that turns over £20,000 and let a flat that brings in £15,000, and your qualifying income is £35,000. That puts you above the £30,000 line, so you would need to use MTD from April 2027 even though your taxable profit could be much lower.
Several common income streams do not count toward the threshold at all:
- Employment income taxed through PAYE
- Your share of profit from a partnership
- Dividends, including from your own company
- State Pension
- Private pensions
The partnership exclusion is the one that most often changes the answer. If you earn £40,000 as an individual partner in a trading partnership and have no sole trader or property income, you are outside the scope of MTD for Income Tax at every current threshold.4GOV.UK. Work Out Your Qualifying Income for Making Tax Digital for Income Tax Partnerships themselves are not yet covered, and no start date has been announced for them.
Jointly Owned Property
For property owned with someone else, HMRC measures each owner’s share separately rather than looking at the total rent. Your qualifying income includes only the proportionate share you report on your self-assessment return. Each joint owner keeps their own digital records and, if above the threshold, reports independently. There is no joint MTD account.
If You Are Above the Threshold
Being over the threshold means three things: you sign up with HMRC before your start date, you keep digital records in compatible software, and you send quarterly summaries followed by a final declaration.
Sign-up uses the same Government Gateway user ID you already use for self-assessment. You need to be registered for self-assessment and have filed a return within the last two years. During sign-up you tell HMRC about each active self-employment and property source, including business name, address, nature of trade, and start date if it falls within the last two tax years.5GOV.UK. Sign Up for Making Tax Digital for Income Tax
You then need commercial software that connects to HMRC. Spreadsheets and paper ledgers only work if they feed into a compatible package. HMRC’s software finder on GOV.UK produces a personalised list, and free products exist for straightforward cases, though these often cap the number of transactions.6GOV.UK. Choose the Right Software for Making Tax Digital for Income Tax Your software records each transaction with a date, amount, and category, then sends HMRC four quarterly summaries a year and a final declaration by 31 January following the end of the tax year. The final declaration replaces the old self-assessment return and is where your actual tax bill is calculated.
If You Are Below the Threshold
You can still sign up voluntarily.7GOV.UK. Making Tax Digital for Income Tax Self Assessment for Sole Traders and Landlords Voluntary sign-up can suit people who already use accounting software and would rather spread record-keeping across the year than compress it into January. Otherwise, staying on standard self-assessment is a legitimate choice until your income crosses the relevant line.
One thing to watch: because the threshold is based on gross income, a growing business or a new let can push you over faster than expected. Check your figures against the correct look-back year each time you file, not against the year you are currently living in.
Exemptions if You Cannot Use Digital Tools
Some taxpayers can apply to be excused from MTD, most commonly on grounds of digital exclusion. You are automatically exempt if your 2024 to 2025 tax return declared that you are not physically or mentally capable of providing financial information to HMRC and you have a power of attorney in place, or a legally appointed deputy, controller, or guardian.8GOV.UK. Find Out if You Can Get an Exemption From Making Tax Digital for Income Tax You are also automatically exempt if that return showed you received or transferred Blind Person’s Allowance.
If you think you qualify but fall outside the automatic categories, contact HMRC by phone or in writing before your MTD start date. Applications for the April 2026 start are open now; applications for April 2027 open from summer 2026.9GOV.UK. Apply for an Exemption From Making Tax Digital for Income Tax A written application should use the subject line “Making Tax Digital for Income Tax — digitally excluded application,” and include your National Insurance number and the reasons you cannot comply digitally. If you have already signed up and are waiting for a decision, you must continue using MTD until HMRC tells you otherwise.
What Happens if You Ignore the Threshold
Once you are in scope, missing deadlines has consequences. MTD for Income Tax uses a points-based late-submission regime. Each missed deadline adds one point, and at four points HMRC charges a £200 penalty, with a further £200 for every later miss. You can only receive one point per deadline, even if you have several businesses missing quarterly updates on the same day. For the 2026 to 2027 tax year, points apply only to tax return deadlines; from 2027 to 2028 the points system extends to quarterly updates as well.10GOV.UK. Penalties for Making Tax Digital for Income Tax
Late payment charges apply to your balancing payment, not to payments on account. Between 16 and 30 days late, the charge is 3% of the tax owed at day 15. From 31 days late, that 3% is joined by a further 3% of the tax owed at day 30, plus a daily charge at an annual rate of 10% on the outstanding balance, running until you pay or for up to two years. In your first year under the new penalties there is no late-payment charge if you pay in full or set up a payment plan within 30 days of the due date. Worth using if 2026 to 2027 is your first year in the system.