Making Tax Digital threshold: do you need it?

Making Tax Digital (MTD) for Income Tax is a new way for sole traders and landlords to keep their records and report to HMRC. You must use it if your qualifying income is over £50,000 (from 6 April 2026), over £30,000 (from 6 April 2027) or over £20,000 (from 6 April 2028), according to GOV.UK. Qualifying income is your income from self-employment and property before expenses, not your profit.

The thresholds and start dates

GOV.UK sets three steps. Each one tests your income for one tax year (GOV.UK):

The word is over: income exactly on a threshold does not count. The earliest step that applies decides your start date, and HMRC writes to you to confirm that you need to start using MTD at the start of the following tax year.

One caution on the last step. GOV.UK gives the £20,000 step from 6 April 2028 as its current guidance, but the history of that page says the government was introducing legislation to confirm it. Check GOV.UK for the latest before you plan around 2028.

The table below is worked out by the SumLark MTD Checker. It tests only the 2025 to 2026 step, with the other two years left at nothing:

What counts as qualifying income

Qualifying income is your total income from self-employment and property, before expenses (also known as turnover) (GOV.UK). The two add together. GOV.UK's example is £25,000 of rent plus £27,000 of self-employment, which makes £52,000.

These do not count:

• employment income taxed through PAYE;
• your share of profit from a partnership, as an individual partner;
• dividends, including those from your own company;
• the State Pension and private pensions.

If you own property jointly, your share counts.

What you have to do under MTD

From your start date you do three things (GOV.UK):

1. Keep digital records of your income and expenses.
2. Send a quarterly update every three months. It is a summary, not a tax return, and you send it even if nothing changed.
3. Send your tax return by 31 January after the end of the tax year. It is completed and sent through your MTD software.

With the standard periods (6 April to 5 April) the quarterly updates are due on these dates. They are the same every tax year (GOV.UK):

If your accounting year runs from 1 April to 31 March you can use calendar periods instead, and the due dates stay the same. You cannot change your update periods for the rest of the tax year once you have sent an update.

Software. HMRC does not provide software. You need commercial software that works with MTD (GOV.UK). Free products exist for simple tax affairs, though they may limit the number of transactions. If you keep your records in spreadsheets you can carry on, with software that links to them (often called bridging software).

Paying tax. MTD does not change how you pay tax or the dates your payments are due.

Penalties, and the soft landing for 2026 to 2027

For the 2026 to 2027 tax year there are no penalty points for missing a quarterly update deadline (GOV.UK). You must still send the updates before you send your return. After that, each missed deadline earns a penalty point, and at 4 points you get a £200 penalty.

Late payment of tax has its own penalties, which depend on how many days late you are, and interest. They replace the current late filing and late payment penalties.

Who is exempt

You are exempt automatically if your qualifying income is £20,000 or less (GOV.UK). You can also apply for an exemption if it is not reasonable for you to use compatible software, for example because of your age, a health condition or disability, or because you have no internet access at home or at your business. Being unfamiliar with accounting software, or having filed a paper return before, is not enough on its own.

If you are exempt you still send a Self Assessment tax return. Partnerships do not need to use MTD for Income Tax at the moment, and GOV.UK says it will set out the timeline later.

What to do now

1. Add up your qualifying income for the tax years GOV.UK tests, before expenses, and compare it with the thresholds above. The MTD Checker does it for you.
2. Look for a letter from HMRC. If you are over the threshold, HMRC writes to you. GOV.UK also says that from September 2026 HMRC begins signing up people who have not signed up themselves.
3. Choose software and sign up, or ask an agent to sign you up. You need to be registered for Self Assessment and to have sent a return in the last two years.
4. Keep records from your start date, and put the quarterly update dates in your diary.

MTD changes how you keep records and report, not how your tax is worked out. To see how much tax and National Insurance your profit makes, use our Self-Employed Tax Calculator.

Frequently asked questions

Do all self-employed people have to go digital?

No. It is compulsory only if your qualifying income is over the threshold for your tax year, and you can be exempt. If your qualifying income is £20,000 or less you are exempt automatically.

How do I know if I need to use Making Tax Digital?

Add up your income from self-employment and property before expenses for each tax year GOV.UK tests, and compare it with the thresholds in the table. HMRC also writes to you if your income is over the threshold.

Can I refuse to go digital?

Not if you are over the threshold, unless you are exempt. You can apply for an exemption if it is not reasonable for you to use compatible software. From 2027 to 2028 missed quarterly update deadlines earn penalty points.

Will Making Tax Digital change when I pay tax?

No. GOV.UK says it does not change how you pay tax or the dates your payments are due.

What is qualifying income?

Your total income from self-employment and property before expenses. A job, a partnership share, dividends and pensions are not part of it.

Does it apply to partnerships?

Not at the moment. GOV.UK says partnerships will need to use it in the future and it will set out the timeline later. Your own self-employment or property income outside the partnership can still count.