Making Tax Digital Threshold: 50,000, 30,000 and 20,000 Pounds

Making Tax Digital for Income Tax (MTD) is the biggest change to Self Assessment in decades: digital records, compatible software and quarterly updates to HMRC. It's arriving in stages, by income. The thing most people get wrong is which income counts, because it's turnover, not profit.

The thresholds and start dates

If your qualifying income is over	In the tax year	You must use MTD from
50,000 pounds	2024 to 2025	The 2026 to 2027 tax year
30,000 pounds	2025 to 2026	The 2027 to 2028 tax year
20,000 pounds	2026 to 2027	The 2028 to 2029 tax year

HMRC looks back at the tax return you've already filed to decide whether you're in. So whether you need MTD for the 2027 to 2028 tax year depends on your 2025 to 2026 return.

What counts as qualifying income

This is the catch. GOV.UK says qualifying income is your total income from self-employment and property before expenses, also known as turnover. Profit doesn't matter. A sole trader with 35,000 pounds of sales and 20,000 pounds of costs has qualifying income of 35,000 pounds, not 15,000 pounds, so they're over the 30,000 pound threshold.

Counts	Doesn't count
Self-employment turnover	Employment income
Property income (before expenses)	Pensions
Both added together, across all your businesses	Savings interest and dividends
	Your share of a partnership's profits

If you have two small businesses and a rental property, you add the turnover from all of them. That's how people below the threshold in each business can still be caught.

Who's automatically exempt

• Anyone with qualifying income of 20,000 pounds or less.
• People without a National Insurance number before the start of the tax year.
• Partnerships, for now. HMRC will set a timeline later.
• Some people who apply, for example if they're digitally excluded.

What MTD means in practice

1. Keep digital records of your self-employment and property income and expenses.
2. Use compatible software.
3. Send a quarterly update every 3 months for each business. These are summaries, not tax returns.
4. Finish the year with a tax return through your software.

Quarterly deadlines

Update period	Deadline
6 April to 5 July	7 August
6 April to 5 October	7 November
6 April to 5 January	7 February
6 April to 5 April	7 May

Each update is cumulative from 6 April, so you can correct earlier figures in the next one. If you had no income or expenses in a period, you still send an update.

The penalty break for 2026 to 2027

Here's some good news that's easy to miss. Late quarterly updates normally earn penalty points, and 4 points means a 200 pound penalty. But GOV.UK says HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. Points still apply for late tax returns. It's a year to get your system working, not a reason to ignore the updates, and the habits you build now are the ones you'll rely on once points apply.

Agents and accountants

If an accountant handles your tax, they can sign you up and send the quarterly updates for you. You'll still need to keep your records digitally or give them what they need each quarter. Agree early who does what, because the quarterly rhythm is new for most small businesses and their advisers.

No letter? You still need to check

HMRC writes to people it thinks are over the threshold, but GOV.UK is clear that if you didn't get a letter, it's still your responsibility to check and sign up. If your turnover is close to 30,000 pounds, work it out from your last return now.

Landlords and MTD

Landlords are in scope on exactly the same basis as sole traders. Rent counts as qualifying income before expenses, so a landlord with gross rents of 32,000 pounds is over the 30,000 pound threshold even if mortgage interest and repairs leave little profit. And if you have a small side business as well, its turnover is added to your rents. Many landlords who've never thought of themselves as running a business will need software and quarterly updates.

What to do now

1. Find your last tax return and add up self-employment and property turnover.
2. Compare it with the threshold for the next start date.
3. Choose compatible software. HMRC can't recommend a specific product, but it publishes guidance on choosing.
4. Start keeping digital records before your start date, so the first quarter isn't a scramble.
5. Sign up, or check whether you qualify for an exemption.

Getting out again

Once you're in, dropping below the threshold for one year isn't enough. GOV.UK says you can choose to opt out if your qualifying income stays below the relevant threshold for 3 tax years in a row.

My verdict

Check your turnover, not your profit, and add up every self-employment and property source. If you're anywhere near 30,000 pounds, pick software and start keeping digital records now, while late quarterly updates aren't penalised. If you're weighing up a structure change, see sole trader vs limited company, and for landlords, property management software.

Frequently asked questions

What is the Making Tax Digital threshold?

Qualifying income over 50,000 pounds for the 2026 to 2027 tax year, over 30,000 pounds for 2027 to 2028 and over 20,000 pounds for 2028 to 2029.

Is the MTD threshold based on profit or turnover?

Turnover. Qualifying income is self-employment and property income before expenses.

Do I add my rental income to my self-employment income for MTD?

Yes. Qualifying income is the total of all your self-employment and property income.

Are there penalties for late MTD quarterly updates?

HMRC won't apply penalty points for late quarterly updates during the 2026 to 2027 tax year. Normally 4 points means a 200 pound penalty.

Do partnerships need to use Making Tax Digital?

Not yet. HMRC will set out a timeline for partnerships later.