MTD Qualifying Income Explained

Qualifying income for Making Tax Digital is your combined gross turnover from self-employment and property, taken from your previous year's Self Assessment return, before expenses. PAYE, dividends, pensions and partnership profit share do not count. The thresholds are £50,000 (MTD from 6 April 2026), £30,000 (April 2027) and £20,000 (April 2028).

Key takeaways

• Qualifying income is gross combined turnover from self-employment and property, not profit.
• The three thresholds are £50,000 (April 2026), £30,000 (April 2027) and £20,000 (April 2028).
• PAYE salary, dividends, pensions and partnership profit share are all excluded.
• For jointly owned property, only your share of the income counts towards the threshold.
• If you have a sole trade and a property business, you file two sets of quarterly updates on the same deadlines.

What counts as qualifying income for Making Tax Digital?

Qualifying income for Making Tax Digital is the total gross income from self-employment and UK property declared on your Self Assessment return for the previous tax year. All sources add together. HMRC's own example: £25,000 in rental income plus £27,000 in self-employment income equals £52,000 of qualifying income, putting that person in scope from 6 April 2026.

The test is turnover, not profit. Whether your property business made a loss after repairs and agent fees does not change what your gross rent was.

Included in qualifying income:

• Gross receipts from one or more self-employments
• Gross UK property income (residential and commercial)
• Gross foreign property income if you are UK resident
• Bare trust income you are beneficially entitled to
• Interest in possession trust income paid directly to you
• Disguised investment management fees and income-based carried interest
• VAT included in declared business income, if you chose to include it

Excluded from qualifying income:

• Employment income (PAYE)
• Your individual share of partnership profits
• Dividends, including from your own company
• State Pension and private pensions
• REIT and PAIF distributions
• Basis period reform transition profits
• Qualifying care relief, averaging relief
• One-off transactions in UK land falling within a single tax year

Having excluded income does not exempt you. A landlord earning £45,000 in rent alongside a £60,000 PAYE salary has £45,000 of qualifying income and is in scope from April 2027.

How do sole trader and property income combine towards the MTD threshold?

Both streams add together, gross, before expenses. A freelance consultant earning £24,000 and a landlord with £28,000 in rent has £52,000 of qualifying income even though neither figure alone clears £50,000.

The table below shows five scenarios. Each assumes income stays at the stated level in the relevant tax year. The "in scope from" column reflects which year's Self Assessment return HMRC tests against each threshold.

Row two is the most instructive. Total income is £72,000, but only £32,000 is qualifying income because the £40,000 PAYE salary is excluded. That person is not in the first wave. One annualisation point: HMRC annualises sole trader income where it has partial-year data. For property income, you must annualise it yourself before comparing it to the threshold.

What if I own property jointly?

Only your share of the rental income counts. If you and a sibling own a property equally and it generates £50,000 in gross rent, your qualifying income from that source is £25,000. With no self-employment income, you are not in scope until the £20,000 threshold applies in April 2028.

If you are only told your share after expenses, HMRC assesses the figure you have declared. Income from a ceased property source still counts for the year it appeared on your return, provided you have at least one other continuing source.

Am I in scope, and when do I start?

The threshold is tested against a specific tax year's Self Assessment return.

HMRC writes to individuals it believes are above the threshold, but the duty to check is yours regardless of whether a letter arrives. Use HMRC's eligibility checker to confirm your position. You do not start using Making Tax Digital for Income Tax until after you have submitted your first Self Assessment return. Partnerships are not yet mandated; HMRC has not published a start date.

Once you are using Making Tax Digital for Income Tax, you can opt out if qualifying income stays below the threshold for three consecutive tax years. An amendment made before the tax year starts can take you in or out of scope; one made after the tax year has started can only take you out. See our complete guide to Making Tax Digital for landlords for the full timeline, exemptions and sign-up steps.

How many quarterly updates do I file if I have a business and rental property?

You file two sets of quarterly updates, one per business, both on the same deadlines. A sole trader who also has a property business submits eight quarterly updates across the year, plus one Final Declaration covering everything. The Final Declaration replaces the Self Assessment return for income inside Making Tax Digital for Income Tax and is due by 31 January following the tax year end.

The first deadline for the 2026/27 tax year is 7 August 2026.

Each deadline is one month and two days after the period ends. For detail on what each update contains, see our guide to MTD quarterly updates. Partnership profit share requires no digital records and no quarterly updates, but must still appear in the Final Declaration through compatible software. HMRC has confirmed it will not charge late-submission penalty points for missed quarterly updates in 2026/27 for those mandated from 6 April 2026.

What income does not count towards MTD qualifying income?

The exclusions matter because a high total income figure can mask a much lower qualifying income figure. The following do not count:

• Employment income (PAYE)
• Your individual share of partnership profits
• Dividends, including from a company you own
• State Pension and private pensions
• REIT and PAIF distributions
• Basis period reform transition profits
• Qualifying care relief and averaging relief
• One-off transactions in UK land falling within a single tax year

Having large excluded income alongside your qualifying income does not exempt you. If your qualifying income clears the threshold, you are in scope.

Frequently asked questions

What is qualifying income for Making Tax Digital?

Qualifying income is your combined gross turnover from self-employment and property, taken from your Self Assessment return for the previous tax year, before expenses. All sources add together. PAYE, dividends, pensions and partnership profit share are not included.

Does my salary count towards the MTD threshold?

No. Employment income paid through PAYE is excluded from qualifying income entirely. A £100,000 salary has no bearing on whether you are in scope for Making Tax Digital for Income Tax.

Do rental income and self-employment income add together for MTD?

Yes. That is the mechanic most people miss. A freelancer earning £24,000 and a landlord receiving £28,000 in rent has £52,000 of qualifying income and is in the first wave, even though neither figure alone clears £50,000.

Is the MTD threshold based on profit or turnover?

Turnover. Qualifying income is gross receipts before any allowable expenses are deducted. Mortgage interest, letting agent fees and repairs do not reduce the figure HMRC uses to assess whether you are in scope.

How is qualifying income worked out for a jointly owned property?

Only your share of the gross rental income counts. If you own a property 50/50 and it generates £60,000 in rent, your qualifying income from that property is £30,000. Add any self-employment income on top of that figure.

Do I need to send separate quarterly updates for my business and my rental property?

Yes. Quarterly updates are submitted per business. If you have a sole trade and a property business, you submit two sets of quarterly updates on the same deadline each quarter, plus one Final Declaration at year end.

The bottom line on qualifying income

The test is gross combined turnover from self-employment and property, not profit and not total income. The number of business and property sources you have determines how many quarterly updates you file each quarter. Getting that filing count wrong is one of the most common errors in the first year of Making Tax Digital for Income Tax.

Landlord Studio is listed on HMRC's MTD software register and handles quarterly MTD submissions for landlords, including the tax-ready reports you need for your Final Declaration. Explore MTD-compatible software for UK landlords to see how it works before the 7 August deadline.

Last updated: 27 July 2026