The MTD qualifying income thresholds are the source of more confusion than any other part of Making Tax Digital. The rules around what counts as “qualifying income,” when you’re mandated, and when you can opt out are complex — and getting them wrong means either missing a compliance deadline or signing up before you need to.
During a Coconut MTD webinar, attendees asked question after question about thresholds: “So last year I had a PAYE contract… does that mean I don’t need to do MTD yet?” and “My 2024-5 income included taxable pension income which took me over £50k” and “£52K threshold or £90k threshold? Confusing.”
Here’s the plain-English breakdown of exactly what counts, when you’re mandated, and how the thresholds work. You can also use the calculator below to check your qualifying income instantly.
What Counts as Qualifying Income for MTD?
According to HMRC’s guidance on qualifying income, qualifying income is your total gross income from self-employment and property — the amount before expenses (also known as turnover), based on the Self Assessment tax return you submitted in the previous tax year.
It includes:
- Self-employment income — your gross turnover from all sole trading businesses (before expenses)
- UK property income — your gross rental income from UK property (before expenses)
- Foreign property income — your gross rental income from overseas property (before expenses)
That’s it. Nothing else counts toward the MTD threshold.
What does NOT count as qualifying income
This is where most of the confusion lies. The following income types do not count toward the MTD threshold:
- PAYE employment income — even if it’s £80,000, it doesn’t trigger MTD
- Pension income — taxable pensions don’t count, even if they push your total income over £50,000
- Dividend income — dividends from shares don’t count
- Savings interest — bank and building society interest doesn’t count
- Partnership income — your share of profit from a partnership as an individual partner does not count (see below for nuances)
- Capital gains — not relevant to MTD for Income Tax
Partnership income — a nuance
Your share of profit from a partnership as an individual partner does not count toward your qualifying income. However, if a partnership tells you about personal self-employment or property income (including disguised investment management fees or income-based carried interest), that income does count and you’ll need to keep digital records and submit quarterly updates for it.
Joint property ownership
If you jointly own a property with someone else, only your share of the property income counts toward your qualifying income. For example, if you and your partner each own 50% of a property generating £50,000 in rental income, your qualifying income from that property is £25,000.
Real examples from webinar attendees
Example 1: PAYE employee with side income
- PAYE salary: £45,000
- Self-employment income: £12,000
- Qualifying income for MTD: £12,000 (only the self-employment portion)
- MTD status: Not mandated in Phase 1 (£12,000 is below £50,000)
Example 2: Retired person with pension and rental income
- Pension income: £35,000
- UK property income: £20,000
- Qualifying income for MTD: £20,000 (only the property portion — pensions don’t count)
- MTD status: Not mandated in any phase (£20,000 is not over £20,000)
Example 3: Sole trader with mixed income
- Self-employment income: £55,000
- Dividend income: £8,000
- PAYE (part-time job): £10,000
- Qualifying income for MTD: £55,000 (only the self-employment portion)
- MTD status: Mandated in Phase 1 (£55,000 is above £50,000)
Example 4: Landlord with variable income
- 2023-24 property income: £33,000
- 2024-25 property income: £27,000
- Qualifying income: assessed each tax year separately
- MTD status: Not mandated in Phase 1 (both years below £50,000), but check each year — if any year exceeds the threshold, you’re mandated
The Three MTD Income Thresholds
MTD for Income Tax phases in over three years based on qualifying income:
| Phase | Start date | Threshold | Who’s affected |
|---|---|---|---|
| Phase 1 | 6 April 2026 | Qualifying income over £50,000 | Sole traders and landlords with SE + property income > £50k |
| Phase 2 | 6 April 2027 | Qualifying income over £30,000 | Additional sole traders and landlords with SE + property income > £30k |
| Phase 3 | 6 April 2028 | Qualifying income over £20,000 | Additional sole traders and landlords with SE + property income > £20k |
The threshold is based on your qualifying income for the previous tax year. So for Phase 1 (starting April 2026), HMRC looks at your 2024-25 qualifying income. If it was over £50,000, you’re mandated from April 2026.
What if your income varies year to year?
This was a common webinar question. One attendee asked: “My income varies, one year £33k, last year £27k.”
The answer: the threshold is assessed each tax year. If your qualifying income exceeds the threshold in any given year, you’re mandated for MTD from the following April. If it drops below the threshold the next year, you’re still mandated — you can’t opt out immediately (see the opt-out rules below).
For example:
- 2024-25: £52,000 qualifying income → Mandated from April 2026
- 2025-26: £28,000 qualifying income → Still mandated (can’t opt out yet)
- 2026-27: £25,000 qualifying income → Still mandated
- 2027-28: £22,000 qualifying income → Still mandated (3 years below threshold not yet reached)
- 2028-29: £18,000 qualifying income → Can now opt out (3 consecutive years below £50,000)
The £90,000 Threshold: A Different Thing Entirely
One webinar attendee asked: “£52K threshold or £90k threshold? Confusing.”
They’re two completely different thresholds:
The £50k/£30k/£20k threshold — when you must start using MTD
This determines whether you’re mandated for MTD and when. It’s based on qualifying income (SE + property income).
The £90,000 threshold — how detailed your records must be
This determines how detailed your digital records need to be. It’s based on turnover (gross income before expenses), not profit.
According to HMRC’s record-keeping guidance for MTD:
- Turnover under £90,000: Your digital records only need to include the date, amount, and whether each transaction is income or an expense. Simple.
- Turnover over £90,000: You need fuller categorisation of income and expenses. Landlords with turnover over £90,000 also need to record finance costs separately.
For example, if you’re a sole trader with £60,000 in qualifying income and £70,000 in turnover:
- You’re mandated for MTD in Phase 1 (£60,000 > £50,000)
- Your record-keeping can be simple (turnover £70,000 < £90,000)
If you’re a sole trader with £55,000 in qualifying income and £95,000 in turnover:
- You’re mandated for MTD in Phase 1 (£55,000 > £50,000)
- Your record-keeping must be more detailed (turnover £95,000 > £90,000)
Once Mandated, Can You Opt Out?
This is one of the most important rules to understand. According to HMRC’s MTD guidance, once you’re mandated for MTD, you cannot simply opt out if your income drops below the threshold.
The 3-year rule
You can only exit MTD if your qualifying income stays below the threshold for 3 consecutive tax years. After 3 years below the threshold, you can notify HMRC that you no longer need to use MTD.
This means if you’re mandated in April 2026 because your 2024-25 income was £55,000, and your income drops to £25,000 in 2025-26, 2026-27, and 2027-28, you can exit MTD in April 2029 — 3 years after your income first dropped below the threshold.
If your income source ceases permanently
There’s an exception: if your income source ceases permanently, you can exit MTD immediately. For example:
- You close your sole trader business and stop trading entirely
- You sell all your rental properties and stop being a landlord
- Your only rental property is destroyed and you don’t replace it
In these cases, you notify HMRC via your “Managing your Income Tax” online account, providing the date your income stopped. You won’t need to send further quarterly updates for the ceased income stream.
One webinar attendee asked: “I had rental income over £50k but sold the property in February.” The answer: if the sale means you no longer have any qualifying income sources, you can notify HMRC that the income source has ceased. No more quarterly updates needed for that stream.
Am I Affected? Try the Calculator
Enter your annual income from each source below. The calculator filters to qualifying income only (self-employment + property), sums it, and tells you your MTD mandate date and whether you can volunteer early.
The interactive calculator appears below this section.
How to Check If You’re Affected
To work out whether you need to register for MTD:
- Calculate your self-employment income for the relevant tax year (gross turnover, before expenses)
- Calculate your UK and foreign property income for the same tax year (gross rental income, before expenses)
- Add them together — this is your qualifying income
- Compare to the threshold for your phase:
- Over £50,000 → mandated from April 2026
- Over £30,000 → mandated from April 2027
- Over £20,000 → mandated from April 2028
If you’re not sure whether your income counts, see our Making Tax Digital for income tax explained guide for the full overview.
What to Do If You’re Mandated
If your qualifying income exceeds the threshold:
- Register for MTD — sign up through your HMRC online account or through your software provider
- Choose compatible software — see our MTD software costs guide for options
- Start keeping digital records from your threshold date (6 April)
- Send your first quarterly update by the end of the first quarter — see our MTD quarterly updates guide
You can also volunteer to start earlier than your threshold date. If you’re due to start in April 2027, you can sign up in 2026 to get used to the system before it becomes mandatory.
The Bottom Line
The key things to remember about MTD qualifying income thresholds:
- Qualifying income = self-employment turnover + UK & foreign property income (gross, before expenses)
- PAYE, pensions, dividends, and other income types do not count
- £50k from April 2026, £30k from April 2027, £20k from April 2028
- The £90,000 threshold is separate — it determines record-keeping detail, not whether you’re mandated
- Once mandated, you can’t opt out for 3 consecutive years below the threshold
- If your income source ceases permanently, you can exit immediately
- You can volunteer early to prepare
For the full MTD overview, see Making Tax Digital for income tax explained. For practical guidance on quarterly updates, see our MTD quarterly updates guide. For help with allowable expenses under MTD, see our allowable expenses guide.