Tax & compliance

What income counts toward the MTD £50,000 threshold?

Q: What income counts toward the MTD £50,000 threshold?

HMRC uses gross qualifying income from self-employment and property, before expenses, to test the Making Tax Digital threshold. Add the relevant income streams together; profit is not the test. For the 6 April 2026 start, HMRC used the 2024/25 Self Assessment return and a threshold above £50,000.

By Kaiser Khan · Updated 23 September 2026 · 2 sources checked

The basic rule

HMRC measures qualifying income as your gross income from self-employment and property — the top-line figures before any expenses are deducted. If the combined total exceeds the threshold, you are in MTD for Income Tax.

This catches people whose profits are modest but whose turnover is high.

A worked example

Say you are a sole trader with £40,000 of turnover and you also receive £15,000 a year in rent from a buy-to-let.

If those figures were on your 2024/25 return, qualifying income was £55,000 and the April 2026 threshold was met even though neither stream crossed it alone. Later phases use different tax years and lower thresholds.

What does not count

Income taxed through PAYE — employment, occupational pensions — does not count toward qualifying income, and neither do dividends, savings interest or capital gains.

Someone earning £80,000 in a job with a £10,000 side hustle is not caught yet; the side income alone is measured against the threshold.

If you are close to the line

HMRC assesses the threshold against your filed tax returns, so keep an eye on the trajectory, not just one year. If growth tips you over, you will get notice before you must join — but choosing software and tidying records early makes the switch far less painful.