MTD Income Thresholds Explained: Does Making Tax Digital Apply to You?

One of the most common questions we hear from self-employed clients in Gravesend is a simple but important one: does Making Tax Digital actually apply to me? The answer depends on your gross qualifying income, and understanding how HMRC calculates this figure is essential to knowing when you need to be ready.

At MCC Partners, we are helping our clients across Kent work out exactly where they stand. Here is a clear breakdown of the income thresholds and how they work.

The Phased Rollout Thresholds

MTD for Income Tax is being introduced in phases, with each phase bringing in sole traders and landlords at progressively lower income levels:

Phase 1 from 6 April 2026: You are affected if your gross qualifying income exceeds £50,000. HMRC will determine this based on the income reported on your 2024/25 Self Assessment tax return, which was due by 31 January 2026.

Phase 2 from 6 April 2027: The threshold drops to £30,000. This will be assessed against your 2025/26 tax return.

Phase 3 from 6 April 2028: The threshold reduces to £20,000, which will capture the majority of self-employed individuals and landlords.

What Counts as Qualifying Income?

This is where many people get caught out. Qualifying income is your gross income from self-employment and property before any expenses or deductions are taken off. It is not your profit.

For example, if you are a self-employed plumber in Gravesend with a turnover of £55,000 but expenses of £20,000, your qualifying income is £55,000, not your £35,000 profit. You would therefore fall into Phase 1 from April 2026.

If you have multiple sources of qualifying income, these are combined. A sole trader earning £30,000 from their business who also receives £25,000 in rental income would have combined qualifying income of £55,000 and would be in scope from April 2026.

What Income Does Not Count?

Not all income is included in the qualifying income calculation. The following are excluded: employment income taxed through PAYE, pension income, savings interest, dividends, and capital gains. Only income from self-employment trades and property businesses is counted towards the threshold.

How HMRC Determines Your Start Date

HMRC looks at the Self Assessment tax return that was due for filing immediately before the start of each mandation phase. For the April 2026 phase, this is your 2024/25 return, which had a filing deadline of 31 January 2026. The specific boxes on the return that HMRC examines are those relating to self-employment turnover and property income receipts.

If you filed your 2024/25 return on time, HMRC already has the figures they need to determine whether you are in scope. If your income was above £50,000, you should expect to be mandated into MTD from April 2026.

What If Your Income Fluctuates?

Many self-employed people experience income that varies from year to year. If your qualifying income was above £50,000 in 2024/25 but drops below it in subsequent years, you may still need to remain within MTD for a period. Current rules indicate that you must have three consecutive years of qualifying income below £30,000 while within MTD before you can exit the regime.

Conversely, if your income is currently below the thresholds but you expect it to grow, you may want to voluntarily adopt MTD-compatible software and processes early. This avoids a rushed transition later and gives you the benefits of better financial visibility from the outset.

Joint Property Owners

If you own rental property jointly with a spouse or partner, only your share of the gross rental income counts towards your qualifying income. For example, if a property generates £60,000 in gross rent and you own it equally with your partner, your qualifying income from that property is £30,000.

Check Your Position with MCC Partners

If you are unsure whether you fall within the MTD thresholds, now is the time to check. At MCC Partners in Gravesend, we can review your income position, assess which phase applies to you, and help you plan your preparation timeline accordingly. Whether you are clearly in scope or sitting close to one of the thresholds, having clarity now means you can make informed decisions about software, processes, and support.

Contact our team at our Saddington Street office in Gravesend today. We will help you understand exactly what MTD means for your business and ensure you are ready when your start date arrives.