The Three Core Requirements of MTD: Digital Record-Keeping, Quarterly Updates and Final Declaration
December 4, 2025
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MTD for Income Tax applies to individuals based on their gross qualifying income — not profit. If your combined turnover from self-employment and property exceeds HMRC’s thresholds (£50,000 from April 2026, £30,000 from April 2027, and £20,000 from April 2028), you must follow MTD rules, regardless of your expenses or net profit.
Making Tax Digital (MTD) for Income Tax is reshaping how millions of taxpayers report their income. With HMRC confirming new phased thresholds and earlier start dates, the key question for many is: “Who will be affected by MTD for Income Tax?” Understanding whether you fall within the new rules depends entirely on how HMRC defines qualifying income — and this is where many taxpayers get caught out.
Below is a clear, user-friendly and factual explanation to help you understand whether MTD ITSA will apply to you, what counts as qualifying income, and when you must join.
HMRC will determine your MTD status based on your combined gross qualifying income — not on your net profit.
your net profit.
Mandatory start dates based on qualifying income:
This represents the newly accelerated timeline for MTD for Income Tax, meaning many taxpayers will be brought into the system much sooner than previously announced.
If your total gross turnover and gross rental income exceed any of the above thresholds in the relevant year, you will be legally required to:
One of the most important clarifications is that MTD is based on gross income, not profit.
Even if your expenses are high and your net profit is low — you must still comply if your gross figures exceed HMRC’s thresholds.
Qualifying income includes:
HMRC strictly looks at turnover received, not profit earned — meaning high-expense or low-margin traders can still fall within scope.
MTD for Income Tax will not apply to:
These groups remain outside the mandatory requirements unless HMRC updates the criteria in future.
With mandatory entry points beginning as early as April 2026, preparing ahead is essential. MTD introduces continuous digital record keeping, new submission formats, and the compulsory use of approved software.
Early preparation ensures:
If your combined gross turnover and rental income place you within scope, you should:
The earlier you start preparing, the easier your journey into MTD will be.
Determining who will be affected by MTD for Income Tax can feel confusing, especially with new thresholds and accelerated start dates. At Naail & Co Chartered Certified Accountants, we specialise in helping individuals calculate their qualifying income, understand their obligations, and transition seamlessly into MTD.
Get in touch with Naail & Co to book your free initial consultation.
Anyone with combined gross turnover from self-employment and property income above £50,000 from April 2026, £30,000 from April 2027, and £20,000 from April 2028 will be affected by MTD for Income Tax.
If the total gross turnover from all your sole-trader businesses plus your rental income exceeds the HMRC threshold, you will be affected by MTD for Income Tax, even if each individual business is below the limit.
Landlords whose gross rental income (before expenses) contributes to qualifying income above the relevant threshold will be affected by MTD for Income Tax. This includes UK, overseas, FHL, and jointly-owned properties.
You will be affected. MTD thresholds are based on gross income, not profit. Even if your net income is very small, high turnover alone triggers the requirement.
If your combined qualifying income is £50,000 or more, you fall into the April 2026 group. Income exactly at the threshold counts.
MTD applies based on your qualifying income for the most recent tax year. If your turnover rises above the threshold, you must join; if it later falls below, different opt-out rules may apply.
Small landlords will be affected by MTD for Income Tax once their gross rental income pushes total qualifying income above £20,000 from April 2028.
You will be affected if your share of the gross rental income, combined with any self-employment turnover, exceeds the relevant threshold.
You are not affected. MTD applies only to qualifying income from self-employment and property. Investment income alone does not bring you into scope.
Company owners are not personally affected unless they also have qualifying income as individuals. MTD for Corporation Tax has not yet been introduced.
Partnerships are currently excluded. Only individuals with qualifying income need to comply with MTD ITSA.
Non-resident landlords will be affected by MTD for Income Tax if their UK rental income pushes their qualifying income above HMRC’s thresholds.
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