Making Tax Digital Qualifying Income: What Counts and What Does Not

The Making Tax Digital threshold is based on qualifying income. That sounds like profit, taxable income or the money that reached your bank account. It is none of those things.

Qualifying income is your gross income from self-employment and property before expenses are deducted. HMRC normally uses the figures from an earlier tax return to decide when you must start using MTD for Income Tax.

The MTD thresholds

Qualifying income	Tax return HMRC checks	MTD starts
Over £50,000	2024-25	6 April 2026
Over £30,000	2025-26	6 April 2027
Over £20,000	2026-27	6 April 2028

The word over matters. Income of exactly £50,000 does not cross the first threshold; £50,001 does.

What counts as qualifying income?

Add together the gross income from every sole-trader business and every UK or foreign property business you own. Use income before expenses, tax, CIS deductions or mortgage costs.

For example, £34,000 from gardening plus £19,000 of rental income gives qualifying income of £53,000. Neither source crosses the threshold alone, but the combined total does.

What does not count?

Employment income taxed through PAYE, partnership profit, dividends, state pension and private pension income do not count towards the MTD qualifying-income threshold. They may still belong on your year-end tax return.

Your business profit is not the threshold figure either. A sole trader with £58,000 turnover and £25,000 expenses has £33,000 profit, but £58,000 of qualifying income.

Jointly owned property

Only your share of jointly owned property income counts. If a property receives £50,000 gross rent and you are entitled to half, your qualifying income from it is normally £25,000. Keep records showing how the share was worked out.

New, ceased and short accounting periods

A source that ceased during the year can still count if you continued to receive qualifying income from another source. HMRC also has annualisation rules for some short periods, so do not assume a partial year automatically keeps you below the threshold.

A five-minute check

1. Find the gross self-employment turnover on the relevant tax return.
2. Add gross property income, using only your share of jointly owned property.
3. Add all sole-trader businesses and property sources together.
4. Do not add PAYE income, pensions, dividends or partnership profit.
5. Compare the total with the correct threshold year.

HMRC may write to tell you that you need to use MTD, but the responsibility to check remains yours. The official GOV.UK guide explains how to work out qualifying income.

What happens next?

If you are in scope, you need digital records and compatible software for separate quarterly updates for each business or property source. flonancial is free bridging software for straightforward sole-trader and UK-property quarterly updates using ordinary income and expense totals. More complex tax adjustments and the year-end tax return may still need another compatible product or an accountant.