What counts as qualifying income for Making Tax Digital?
Qualifying income is your combined gross income from self-employment and UK property (rental), measured before expenses. It is turnover, not profit. Employment income and dividends do not count.
Detailed Explanation
Qualifying income for Making Tax Digital for Income Tax Self Assessment is the total of your gross self-employment income and gross UK property income, combined and measured before deducting any expenses.
This is a critical distinction: it is your turnover, not your profit.
Income that counts: - Self-employment turnover (all trades combined) - UK residential rental income - UK commercial rental income - Furnished holiday let income - Airbnb and short-term let income
Income that does NOT count: - Employment income (PAYE salary) - Dividends from a limited company - Interest and savings income - Pension income - REIT dividends - Property fund income - Capital gains
Multiple income streams are combined. If you earn £30,000 from self-employment and £25,000 from rental income, your qualifying income is £55,000 — above the April 2026 threshold of £50,000.
Joint property ownership: Each owner counts only their share. If you jointly own a property with your spouse (50/50), each of you counts half the gross rent.
Qualifying income is assessed from your most recent Self Assessment tax return.
Source: HMRC MTD ITSA — Qualifying Income Definition
Real-World Examples
High Turnover, Low Profit
You run a catering business with £55,000 gross turnover but only £8,000 profit after expenses. Your qualifying income is £55,000 (gross), so you are in scope from April 2026 despite your low profit.
Combined Self-Employment and Rental
You earn £28,000 from freelance writing and £25,000 in gross rental income from two properties. Your combined qualifying income is £53,000. You are in scope from April 2026.
Joint Property Ownership
You and your spouse jointly own rental properties generating £70,000 gross rent (50/50 split). Your share is £35,000. You are not in scope for April 2026 (under £50,000) but will be from April 2027 (over £30,000).
Common Mistakes to Avoid
- Using profit (after expenses) instead of gross income (before expenses) to assess the threshold.
- Forgetting to combine self-employment and property income — they are added together.
- Including PAYE salary or dividends when calculating qualifying income — these do not count.
- Assuming that joint property income is counted at the full amount rather than each owner's share.
Frequently Asked Questions
Is it based on my last tax return or current year?
HMRC uses the qualifying income shown on your most recent Self Assessment return to determine which phase you fall into. For April 2026, this is typically your 2024/25 return.
What if I have two self-employed businesses?
All self-employment income is combined. If you run a consultancy earning £30,000 and a side business earning £25,000, your qualifying income includes £55,000 from self-employment alone.
Does Airbnb income count?
Yes. Airbnb and short-term let income is classified as property income and counts towards your qualifying income for MTD.
What about the trading allowance?
The £1,000 trading allowance and £1,000 property allowance apply to your tax calculation but do not reduce your qualifying income for the MTD threshold assessment. It is measured on gross income.
Practical Tips
- Pull up your latest Self Assessment return and add together boxes for self-employment turnover and property income to find your qualifying income.
- If you are close to a threshold, check whether joint ownership structures reduce your individual share below the limit.
- Remember that qualifying income can change year to year — monitor it annually.
- If in doubt, use the HMRC online tool or ask your accountant to confirm your qualifying income.
Related Questions
When does Making Tax Digital for Income Tax start?
MTD for Income Tax Self Assessment starts in April 2026 for those with qualifying income over £50,000, April 2027 for £30,000+, and April 2028 for £20,000+.
Does rental income count towards the Making Tax Digital threshold?
Yes. UK rental income counts as qualifying income for MTD. It is combined with any self-employment income: if the total gross income exceeds £50,000, you are in scope from April 2026.
Does Making Tax Digital apply to limited companies?
MTD for Income Tax does not apply to limited companies. Corporation Tax MTD has been cancelled by HMRC. However, VAT-registered limited companies must already use MTD for VAT.
Get instant answers to all your accounting questions
AccountsOS uses AI to answer your tax and accounting questions in plain English. No more Googling or waiting for your accountant.
Get Started FreeFree during Early Access - No credit card required