MTD qualifying income determines when a sole trader or landlord must start using Making Tax Digital for Income Tax. It is generally the combined gross income from self-employment and property before business or property expenses are deducted.
This means someone can fall within MTD even when their taxable profit is considerably lower than the applicable threshold. Income from multiple sole trades and property businesses may also need to be added together.
Understanding which figures count is therefore one of the first steps in preparing for MTD.
What Is MTD Qualifying Income?
MTD qualifying income is the total gross income you receive from qualifying self-employment and property sources during a tax year.
It can include:
- Turnover from one or more sole trader businesses
- Fees earned through freelance or consultancy work
- Sales made through an ecommerce business
- Income from a UK property business
- Relevant income from foreign property
- Other self-employed trading income reported through Self Assessment
The calculation is made before deducting expenses, allowances or tax reliefs.
HMRC normally uses information from a previously submitted Self Assessment return to determine when you must enter MTD. If your qualifying income is above the relevant threshold, HMRC may write to tell you when to start.
However, it remains your responsibility to check your position even if you do not receive a letter.
What Are the MTD Qualifying Income Thresholds?
Making Tax Digital for Income Tax is being introduced in stages.
| Tax return assessed | Qualifying income | MTD start date |
| 2024/25 | More than £50,000 | 6 April 2026 |
| 2025/26 | More than £30,000 | 6 April 2027 |
| 2026/27 | More than £20,000 | 6 April 2028 |
The wording “more than” is important. Someone with qualifying income of exactly £50,000 would not enter the first phase solely because of that figure. Someone with qualifying income of £50,001 potentially would, subject to eligibility and exemption rules.
The threshold used for each phase comes from an earlier tax return. This gives taxpayers and HMRC time to identify who must prepare for the following MTD tax year.
Current thresholds and start dates are available in HMRC’s MTD eligibility guidance.
Is MTD Qualifying Income Based on Turnover or Profit?
MTD qualifying income is based on gross income or turnover, not profit.
Turnover is the income generated by a business before business expenses are deducted. Profit is what remains after allowable expenses and relevant accounting adjustments have been considered.
Consider the following example:
| Calculation | Amount |
| Sales and trading income | £62,000 |
| Allowable business expenses | £27,000 |
| Profit before other adjustments | £35,000 |
The relevant starting figure for the MTD threshold is £62,000. The £35,000 profit may be relevant when calculating the person’s taxable income, but it is not the figure used for the basic MTD qualifying-income test.
This distinction can affect businesses with relatively high sales but narrow margins, including:
- Online retailers
- Market traders
- Construction subcontractors
- Delivery businesses
- Food businesses
- Product-based startups
- Self-employed professionals who subcontract work
An ecommerce seller may collect £70,000 from customers but retain a much smaller amount after stock, advertising, marketplace fees, delivery charges and refunds. The gross qualifying-income calculation is not normally reduced by these costs.
Which Self-Employment Income Counts?
Gross income from a sole trade generally counts towards MTD qualifying income.
This may include:
- Sales of goods
- Fees for professional services
- Freelance project income
- Consulting fees
- Contracting income
- Commissions
- Online marketplace sales
- Direct website sales
- Cash takings
- Other trading receipts
A sole trader should consider the income reported in the self-employment section of the relevant Self Assessment return.
The business name, bank account or platform used to collect payment does not necessarily change the treatment. If the activity forms part of your self-employment, the income may count even when it is received through a payment processor or marketplace account.
Accurate bookkeeping support can help ensure the sales figure is not understated or accidentally counted twice.
How Are Amazon, Shopify, eBay and Etsy Sales Treated?
Ecommerce sellers must distinguish between gross customer sales and the net amount deposited by a marketplace or payment processor.
A marketplace settlement may be reduced by:
- Platform fees
- Advertising charges
- Payment processing costs
- Fulfilment charges
- Refunds
- Shipping purchased through the platform
- Other deductions
If Amazon records customer sales of £12,000 but deposits £9,200 after deducting charges, using only the £9,200 bank deposit may understate both sales and expenses.
The bookkeeping records may need to show the appropriate gross sales separately from marketplace costs. The correct treatment depends on the reports, transactions and accounting basis used.
This is particularly important when testing an MTD threshold because the qualifying-income calculation is based on gross income before expenses.
AccountancyNet works with businesses using Amazon, Shopify, eBay and Etsy. This ecommerce experience can help sellers establish a clearer method for recording platform sales, deductions and settlements.
What If You Have More Than One Sole Trader Business?
Income from multiple sole trader businesses is generally combined when assessing the MTD threshold.
Suppose you operate as a self-employed graphic designer and also sell printed products online:
| Income source | Gross income |
| Graphic design business | £34,000 |
| Online product business | £19,000 |
| Total qualifying income | £53,000 |
Neither activity exceeds £50,000 by itself. However, their combined qualifying income is £53,000.
This could place you within the April 2026 phase if these figures appeared in the relevant 2024/25 tax return and no exemption applied.
After entering MTD, each sole trader business generally requires separate digital records and separate quarterly updates. Combining the income for the eligibility calculation does not mean all business transactions should be mixed into one undivided record.
Does UK Property Income Count?
Yes. Gross income from a UK property business can count towards MTD qualifying income.
This may include:
- Residential rent
- Commercial property rent
- Certain lease premiums
- Other taxable property receipts
- Your share of income from jointly owned rental property
If you own several UK properties, they are generally treated as one UK property business for record-keeping purposes. Your share of jointly let property income can also form part of that business.
Property income is especially important for sole traders because self-employment and property income may need to be combined.
For example:
| Income source | Gross income |
| Plumbing business | £39,000 |
| UK rental property | £14,000 |
| Total qualifying income | £53,000 |
Looking only at the plumbing turnover would produce the wrong conclusion. The combined qualifying income is above £50,000.
Does Foreign Property Income Count?
Foreign property income can count if you were a UK tax resident during the relevant tax year.
For a UK resident, HMRC generally considers:
- Self-employment income
- UK property income
- Foreign property income
For example, a UK-resident sole trader may earn £38,000 from a business in Manchester and receive £15,000 from a property in France. The combined qualifying income could be £53,000.
Foreign property records may require additional separation under MTD. HMRC states that digital records may need to be maintained separately for individual foreign properties, including the taxpayer’s share of jointly let property income.
Residence status and foreign-income reporting can be complicated. Advice should be based on the person’s actual residence position, tax return and income sources.
What If You Are Not a UK Tax Resident?
Different rules can apply to a person who was not UK resident during the relevant tax year.
HMRC generally considers:
- UK property income
- Self-employment income declared in the UK Self Assessment return
- Income from trading in or developing UK land where applicable
Foreign property income and foreign self-employment income not declared on the UK return may not count towards the UK MTD qualifying-income calculation.
For example, an individual could be resident in Spain, operate a Spanish sole trade and receive rent from a UK property. If only the UK property income is reported through the UK Self Assessment return, that may be the relevant qualifying source.
Non-residents should not assume that all worldwide income counts or that none of it counts. The treatment depends on residence status and the information declared in the UK.
HMRC provides further detail in its qualifying-income guidance.
Does Employment Income Count?
Employment income taxed through PAYE does not normally count towards MTD qualifying income.
Suppose someone receives:
| Income source | Amount |
| Employment salary | £45,000 |
| Sole trader income | £18,000 |
| Total personal income | £63,000 |
The total personal income is £63,000, but the relevant MTD qualifying income may be only £18,000 because the £45,000 salary is employment income.
The person may still need to report the self-employment income through Self Assessment. However, the employment salary does not normally bring the sole trade into MTD by itself.
This illustrates why total taxable income and MTD qualifying income are not interchangeable.
Do Dividends, Savings and Pension Income Count?
The following sources do not normally count towards the MTD qualifying-income threshold:
- Dividends
- Bank or building society interest
- Pension income
- Employment income
- Capital gains
- Certain trust or estate income
- Other non-qualifying investment income
These amounts may still need to be included in your annual tax return. They can affect the final amount of tax due even though they are not used in the MTD threshold calculation.
For example, a taxpayer might receive £28,000 in sole trader income and £35,000 in dividends. Their overall income exceeds £50,000, but the £35,000 dividend income does not normally count towards the MTD qualifying-income threshold.
Does Partnership Income Count?
Partnership income is not normally included as self-employment income for the basic MTD qualifying-income test discussed here.
A person may be both:
- A partner in a partnership
- A sole trader operating a separate business
The partnership profit share and separate sole trader turnover should not automatically be combined as if both were sole trader sales.
However, the separate sole trade and any qualifying property income may still place the person within MTD.
Partnership structures and individual MTD obligations should be reviewed carefully. The fact that a business activity feels self-employed does not necessarily mean it is reported as an individual sole trade on the tax return.
Does Limited Company Income Count?
Income earned by a limited company does not normally count as the director’s personal MTD qualifying income.
A limited company is a separate legal entity. Its sales belong to the company rather than its shareholders or directors.
Payments received personally from the company may include:
- Salary
- Dividends
- Director’s loan transactions
- Reimbursed expenses
These are not treated as sole trader turnover merely because the recipient owns the company.
A company director could still have a separate sole trader business or rental property. Those sources must be assessed independently.
For example:
| Income source | Amount | Counts towards MTD threshold? |
| Salary from limited company | £15,000 | Normally no |
| Dividends from company | £32,000 | Normally no |
| Separate consultancy sole trade | £24,000 | Yes |
| UK rental income | £9,000 | Yes |
| Total qualifying income | £33,000 |
In this example, the individual’s relevant qualifying income may be £33,000 rather than the total amount received from all sources.
How Do Trading and Property Allowances Affect the Calculation?
The trading allowance and property allowance can affect reporting, but they should not automatically be deducted from gross receipts when checking the MTD threshold.
Where a person claims an allowance, the gross income source may still be relevant. HMRC also has specific digital-record rules for smaller income sources when a taxpayer has entered MTD because of other qualifying income.
For example, someone might have:
- £58,000 of property income
- £1,900 from a side business
- A claim for the trading allowance
Because the person is already within MTD due to the property income and the side-business income exceeds the relevant allowance threshold, digital records may be needed for both sources.
The interaction between allowances, qualifying income and digital-record obligations should be checked using current guidance rather than assuming the allowance removes the underlying income.
MTD Qualifying Income Examples
Example 1: One sole trade
A self-employed consultant receives £57,000 in fees and incurs £18,000 in expenses.
The qualifying income is £57,000. The estimated £39,000 profit is not used for the threshold test.
Example 2: Two sole trades
A photographer receives £31,000, while a separate online shop generates £23,000.
The combined qualifying income is £54,000. Both businesses must be considered even though neither individually exceeds £50,000.
Example 3: Self-employment and property
A driving instructor receives £42,000 from lessons and £11,000 from a rental property.
The combined qualifying income is £53,000.
Example 4: Employment and self-employment
An employee receives a £48,000 salary and earns £14,000 from freelance work.
The MTD qualifying income may be £14,000 because the employment salary does not normally count.
Example 5: Company director with a sole trade
A director receives £40,000 through salary and dividends from a company. They also generate £27,000 through a separate sole trader activity.
The MTD qualifying income may be £27,000. Company income is not automatically treated as the director’s sole trader income.
Example 6: UK and foreign property
A UK resident receives £22,000 from UK property and £31,000 from foreign property.
The combined qualifying income may be £53,000.
Example 7: Low profit ecommerce business
An online seller generates £75,000 in gross sales but has £50,000 in stock, platform, delivery and advertising costs.
The qualifying-income figure is based on the £75,000 gross income, not the remaining £25,000 before further adjustments.
Where Can You Find Your Qualifying-Income Figures?
The starting point is normally the Self Assessment return HMRC uses for the relevant MTD phase.
Review:
- Self-employment supplementary pages
- UK property supplementary pages
- Foreign property information
- Turnover or gross income figures
- Each separately reported sole trade
- Relevant jointly owned property income
- Residence information where applicable
Do not rely only on taxable profit, tax owed or payments on account. Those figures answer different questions.
If the return contains an error, seek advice about correcting it. Using an incorrect return to assess MTD could result in starting late or signing up unnecessarily.
AccountancyNet’s Self Assessment service can help review the relevant return and income sources.
What Happens If Your Income Changes?
HMRC checks qualifying income using the relevant completed tax return rather than asking you to predict every short-term fluctuation.
If your income rises above a future threshold, you may be required to enter MTD from the applicable later start date.
Falling below the threshold does not necessarily allow you to leave MTD immediately. Once a person is required to use the system, specific exit conditions apply. HMRC may consider qualifying income over several periods before the person can opt out.
Do not stop sending updates simply because current-year sales have fallen. Check the formal exit rules first.
What Should You Do After Calculating Your Income?
If your qualifying income is above the relevant threshold:
- Confirm the MTD start date.
- Check whether an exemption applies.
- Identify every qualifying income source.
- Choose MTD-compatible software.
- Establish separate digital records where required.
- Sign up through HMRC or authorise an accountant.
- Prepare for quarterly updates.
- Continue planning for the annual tax return.
For a broader explanation of the reporting process, read the complete guide to Making Tax Digital for sole traders once published.
Frequently Asked Questions
Is MTD qualifying income the same as taxable income?
No. MTD qualifying income generally measures gross self-employment and property income. Taxable income considers profit, deductions, allowances and other taxable sources.
Do business expenses reduce MTD qualifying income?
Business expenses do not normally reduce the gross income used for the MTD threshold. They remain relevant when calculating business profit and tax.
Are VAT amounts included in qualifying income?
The correct figure can depend on how the business prepares its accounts and reports turnover. VAT-registered businesses should use figures consistent with their accounting basis and tax return rather than making an unsupported adjustment.
Do I combine income from multiple businesses?
Yes, gross income from separate sole trader businesses generally needs to be combined. Each business may then require separate digital records and quarterly updates.
Will HMRC tell me if I must use MTD?
HMRC may write to taxpayers whose returns indicate they are above the threshold. You remain responsible for checking your position even if no letter arrives.
Can an accountant calculate my qualifying income?
Yes. An accountant can review your tax return, identify relevant income sources and explain which start date appears to apply.
Get Your MTD Position Checked
MTD qualifying income is not simply your profit or your total income from every source. It usually combines gross self-employment and property income while excluding items such as salary, dividends and pension income.
Mistakes are most likely when a person has multiple businesses, property income, ecommerce marketplace settlements or a mixture of company and sole trader activities.
AccountancyNet supports sole traders, startups, landlords and ecommerce businesses across England and Wales. Contact AccountancyNet to request a review of your income sources and the steps needed to prepare for MTD.
This article provides general information based on HMRC guidance available in July 2026. It is not personalised tax advice. Rules and guidance can change, so obtain advice based on your circumstances before acting.