For landlords and sole traders, the Making Tax Digital thresholds decide when they need to switch to Making Tax Digital (MTD) for income tax. MTD is being introduced in stages for Income Tax, meaning not every sole trader or landlord has to join at the same time.
From April 2026, the first group of affected taxpayers with qualifying income above £50,000 must use MTD for Income Tax. Then, this threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
If you are a sole trader or a landlord, you need to understand the thresholds. This can help you determine when you need to prepare for digital record-keeping, compatible software, and quarterly updates. Let’s discuss the current Making Tax Digital thresholds, the rollout dates, and what you may need to do next.
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What Are the Making Tax Digital Thresholds?
The Making Tax Digital income threshold refers to the level of qualifying income that determines when a landlord or sole trader must start using MTD for Income Tax.
HMRC has introduced the requirements in stages, as mentioned in the table below:
| Self Assessment tax year | Qualifying income | MTD start date |
| 2024/25 | More than £50,000 | 6 April 2026 |
| 2025/26 | More than £30,000 | 6 April 2027 |
| 2026/27 | More than £20,000 | 6 April 2028 |
These are the current Making Tax Digital thresholds published by HMRC. Note that the thresholds are based on qualifying income, not simply profit.
What Is Qualifying Income for Making Tax Digital?
Qualifying income for MTD is the total income from self-employment and property for the relevant tax year, before deducting expenses. Generally, for MTD purposes, this is referred to as turnover. For instance:
Your gross income could be £27,000 from self-employment income and £25,000 from rental income; then your total qualifying income would be £52,000.
Again, the Making Tax Digital thresholds are based on qualifying income, not profit. Income such as employment income, State Pension, dividends, and private pensions does not count towards the MTD qualifying income threshold.
What Is MTD Threshold 2026/27
For 2026/27, the MTD threshold is £20,000. This threshold helps determine who will need to use MTD for Income Tax from 6 April 2028.
The relevant tax years and thresholds are:
- More than £50,000 qualifying income in 2024/25 → MTD from 6 April 2026
- More than £30,000 in 2025/26 → MTD from 6 April 2027
- More than £20,000 in 2026/27 → MTD from 6 April 2028
Thus, exceeding £20,000 in 2026/27 does not mean MTD starts immediately. It determines whether MTD will apply from 6 April 2028, subject to the relevant conditions.
Who Qualifies for Making Tax Digital in the UK?
Now that you know Making Tax Digital thresholds, let’s understand who needs to use MTD. As per HMRC, you need to use MTD for Income Tax if all the relevant conditions apply. So, you generally need to:
- Be a sole trader or landlord registered for Self Assessment
- Receive income from self-employment, property, or both
- Have qualifying income above the relevant threshold for the tax year
- Not qualify for an exemption
The relevant start date depends on your qualifying income.
Additionally, partnerships will need to use MTD for Income Tax in the future. However, the timeline for partnerships will be set out at a later date.
Does Business Profit Determine the MTD Threshold?
One of the important points about the Making Tax Digital thresholds is that your business profit does not determine the MTD threshold. For MTD purposes, qualifying income is the total income from self-employment and property before expenses. So, you should not simply compare your taxable profit with the MTD threshold.
What Happens When You Become Subject to MTD?
Once you fall within MTD requirements, you will need to keep digital records and use compatible software to send quarterly updates to HMRC.
Moreover, you will also need to submit a tax return using compatible software. You need to create digital records using compatible software and send quarterly updates according to your reporting periods.
What if Business Income Falls Below the Threshold?
If your qualifying income falls below Making Tax Digital thresholds, your position can change. Once you start using MTD for Income Tax, and your qualifying income is £20,000 or less for three consecutive tax years, you can choose to stop using MTD.
Therefore, you should monitor your qualifying income rather than assuming that your MTD position will not change.
Are There Exemptions From Making Tax Digital?
Not everyone who appears to meet the income threshold will necessarily have to use MTD.
Exemptions are there for certain individuals who cannot reasonably use compatible software. This can include people affected by factors such as age, disability, health condition, or location. In specific circumstances, certain religious beliefs may also qualify for an exemption.
Check the latest HMRC guidance on MTD exemptions and apply for an exemption if you think you should be exempt.
How Businesses Can Prepare for the MTD Thresholds
If you are approaching one of the Making Tax Digital thresholds, you should prepare before your mandatory start date.
You can follow these steps for MTD preparation:
- Calculate your qualifying income.
- Check which tax year is relevant.
- Check whether you qualify for an exemption.
- Review your current bookkeeping system.
- Choose compatible software.
- Start maintaining the required digital records.
- Understand when quarterly updates need to be submitted.
- Consider whether you need professional accounting support.
It is advisable to start early. This can give you more time to become familiar with the software and digital record-keeping requirements.
Understand Making Tax Digital Thresholds with Expert Accountants
At MicroEntityAccounts, we have accountants who can help you calculate your qualifying income, set up compatible accounting software, and prepare and submit quarterly updates to HMRC. Get a quote today!
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The Bottom Line
The Making Tax Digital thresholds determine when you need to use Making Tax Digital for Income Tax. For 2026, those with qualifying income of more than £50,000 need MTD. From 6 April 2027, the threshold will fall to over £30,000, and in 2028 it will fall to over £20,000.
Keep in mind that these thresholds are based on qualifying income from self-employment and property before expenses, not taxable profit.
If you are approaching an MTD threshold, you should check your qualifying income, whether an exemption applies, and prepare to use compatible software and keep digital records.
