Qualifying income for MTD for Income Tax explained

Date

07 Jan 2026

Qualifying income for MTD for Income Tax explained

Starting from April 2026, Making Tax Digital for Income Tax (MTD for Income Tax) will impact sole traders, the self-employed and landlords with qualifying income over £50,000.

Those impacted will need to keep digital records and submit quarterly updates using MTD-compatible software, marking a significant change for how sole traders, the self-employed and landlords manage their tax affairs.

With the deadline of April 2026 fast approaching, we would advise staying informed and preparing now to ensure compliance.

What is qualifying income?

A frequent area of confusion is the definition of “qualifying income.” Simply put, qualifying income includes:

Gross income from self-employment
Gross rental income from UK property

Importantly, these sources of income are considered in combination. It’s not enough to look at each stream in isolation.

Other income such as dividends, interest, pensions, etc. are not considered in the Qualifying Income Threshold test, but they would be accounted for in the digital tax return that will be completed in MTD compatible software.

Income vs. profit – why it matters

Another point that often leads to misunderstanding is the difference between income and profit. For the purposes of determining whether you fall within MTD’s scope:

Income refers to your total gross earnings - before any allowable business or property expenses.
Profit, on the other hand, is what remains after deducting those expenses.

MTD eligibility is assessed based on income, not profit. So, it’s the top-line figure - the full amount received before deductions - that matters.

Example: If you earn £25,000 from self-employment and £30,000 from rental income, your combined qualifying income is £55,000. As this exceeds the initial £50,000 threshold, you will fall within the first wave of MTD for Income Tax from April 2026.

A common area of confusion

We’ve answered some common questions below to help clarify some points, and have further FAQs at the end of this guide to help clear up other areas:

Each property owner will need to file their own quarterly submission for their share of income and costs. Please note, however, there is an easement which means you can elect to only report your share of income each quarter and catch up reporting of expenses in the final submission. This will make life easier for a lot of joint property owners.

HMRC have confirmed that formal partnerships are not included in the scope of MTD for Income Tax currently, but they are likely to come in at some point.

If your surgery is receiving rental income - such as pharmacy rent - which is disclosed on the Partnership Tax Return (and not on the Land & Property pages of a personal Self-Assessment), it falls outside the scope of MTD for Income Tax.

Note: As above, formal partnerships are not included in the scope of MTD for Income Tax currently, but they are likely to come in at some point.

Stay up-to-date with our MTD for Income Tax Guide

To support you and help you prepare, we've created a clear and practical guide covering everything you need to know about MTD for Income Tax.

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Luke Quince

Tech & Process Leader

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