Qualifying Income for MTD Explained: How It's Calculated
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“Qualifying income” is the single figure that decides whether — and when — you have to join Making Tax Digital for Income Tax. Get it wrong and you might miss your sign-up window, or assume you’re in scope when you’re comfortably not. It’s a more specific number than most people expect, and it doesn’t work the way your annual tax bill does. Here’s exactly how it’s calculated.
Disclaimer: This article provides general information only and does not constitute tax advice. Consult a qualified tax adviser or accountant for advice specific to your circumstances.
The basic formula: gross income, not profit
Qualifying income is your gross self-employment turnover plus your gross property income, added together, before expenses are deducted. This is the detail that catches people out, because the number you’re used to thinking about — your taxable profit, after allowable expenses — is usually a lot smaller.
For example, a sole trader with £45,000 in turnover and £15,000 of allowable business expenses ends the year with £30,000 of taxable profit. But their qualifying income for MTD purposes is £45,000 — the turnover figure, not the profit figure. That puts them over the £30,000 threshold even though their actual profit doesn’t. The same logic applies to property income: it’s the gross rent that counts, not what’s left after mortgage interest, agent fees, and repairs.
Which tax year decides your start date
Each threshold is tested against a specific tax year, and your start date follows the April after that year ends:
| Qualifying income over | Tax year it’s measured in | MTD start date |
|---|---|---|
| £50,000 | 2024–25 | 6 April 2026 |
| £30,000 | 2025–26 | 6 April 2027 |
| £20,000 | 2026–27 | 6 April 2028 |
HMRC looks at the figures on your Self Assessment return for the relevant year to confirm whether you’re mandated from the following April. We cover each threshold in more detail in MTD from April 2027: the £30,000 threshold and MTD from April 2028: the £20,000 threshold — or see the complete Making Tax Digital guide for the full rollout.
What counts towards qualifying income
Self-employment turnover. This includes income from any trade you run as a sole trader, reported on Self Assessment — not just your main business. If you have more than one self-employed activity, such as a freelance consulting practice alongside a small online shop, both add into the same total.
Side hustles. If a side activity is genuinely taxable trading income that you report through Self Assessment, it counts towards qualifying income the same as any other self-employment — regardless of how small or occasional it feels. Where it gets genuinely ambiguous — for instance, distinguishing an occasional hobby sale from the start of a trading activity — gov.uk has guidance on what counts as trading, and it’s worth asking an accountant about borderline cases rather than guessing.
Property income. Gross rental income from property you let out, before deducting expenses like letting agent fees, repairs, or mortgage interest. If you own more than one rental property, the income from all of them is combined.
Combined income. If you have both self-employment and property income, the two are added together for the threshold test — even if neither alone would cross the line. We go through several worked examples in sole trader and landlord combined income under MTD, including how jointly-owned property is treated.
What doesn’t count
PAYE employment income does not count towards qualifying income. If you’re employed and pay tax through PAYE — whether that’s your main income or a job alongside self-employment — that salary is not included in the MTD threshold test. MTD for Income Tax is specifically about self-employment and property income; employment income sits outside it entirely.
Other income types you might see on a Self Assessment return — dividends, savings interest, pension income — aren’t part of the self-employment-and-property test that defines qualifying income either. If your return includes a mix of income types and you’re not sure how each one factors into your overall tax position, check gov.uk or ask your accountant; this article only covers the self-employment and property side that MTD actually measures.
Multiple businesses and jointly-owned property
A couple of situations are common enough to flag specifically:
- Running more than one trade or owning more than one property doesn’t create separate threshold tests — everything still rolls into one combined qualifying income figure.
- Jointly-owned property only counts your share towards your own qualifying income, not the full rental income the property generates. The detail on this — and on running a trade and a rental property side by side — is in sole trader and landlord combined income under MTD.
If you’re close to a threshold
Qualifying income is worth calculating properly rather than estimating, especially if you’re within a few thousand pounds of £20,000, £30,000, or £50,000. The gap between your turnover and your profit can easily be the difference between being in scope and not. gov.uk has the current guidance, and an accountant can confirm your figures well ahead of any filing deadline — far better than finding out you were wrong after the fact.
Taxr keeps the expense side organised
Taxr won’t calculate your qualifying income for you — that number comes from your turnover and rental income as reported on your Self Assessment return, and it’s worth confirming with your accountant if you’re near a threshold. What Taxr does well is the other side of the ledger: scan a receipt and its AI extracts the vendor, date, total and VAT automatically, then sorts it into tax-aligned categories so your expense records stay clean and organised all year, ready to export as Excel or PDF whenever you or your accountant need them.
Taxr is free for your first 10 scans, then Premium is $2.99/month or $29.99/year (USD), on iOS and Android.