Key takeaways:
If your total gross income from self-employment and renting property goes over the Making Tax Digital limit, you’ll need to keep digital records and submit quarterly updates with MTD-compatible software. The thresholds kick in every April: £50,000 in 2026, £30,000 in 2027, and £20,000 in 2028.
Making Tax Digital (MTD) for Income Tax introduces new digital record-keeping and reporting rules, impacting sole traders and landlords as distinct categories of taxpayers. Tax changes can feel daunting, but knowing where you stand is the first step to staying seamlessly in control. While MTD for VAT was introduced in April 2022, the MTD Self Assessment threshold rollout determines exactly when self-employed individuals and property owners must comply with digital updates.
What are the MTD criteria and limits?
The key factor in determining whether Making Tax Digital applies to you is your annual gross qualifying income. Your eligibility is assessed individually across two main categories: gross turnover from self-employment for sole traders, and gross rental income for landlords (or your combined total if you operate as both). This is your total income before deducting expenses. For more key dates, see our MTD timeline guide.
MTD Self Assessment threshold dates
The government has set specific income tiers to determine when you must sign up for MTD for Income Tax:
Qualifying income definition: Gross income (sales/rent) from self-employment and property before expenses. Non-qualifying income that doesn’t count toward your threshold includes: employment (PAYE), share of profit from a partnership as an individual partner, dividends (including those from your own company), a State Pension, and private pensions.
The rollout of MTD for IT is happening in a phased approach based on this income, which means the date you need to comply depends on how much you earn.
From April 2026: MTD for IT will apply to you if your total qualifying income from self-employment and/or property is over £50,000 for the 2024 to 2025 tax year.
From April 2027: This will be extended to include individuals with a qualifying income over £30,000.
From April 2028: The government plans to extend the mandatory MTD limits to those earning over £20,000.
If your qualifying income is below these thresholds, you're not required to join MTD for IT for now. However, you can still choose to sign up voluntarily if you'd like to get ahead of the curve.
What if my income goes up and down?
To decide who has to comply with Making Tax Digital in April 2026, HMRC checks your 2024 to 2025 Self Assessment return. For example, if you are self-employed with £35,000 in sales and earn £20,000 in rental income (£55,000 total qualifying income), your gross turnover exceeds £50,000, so you must comply from April 2026. However, if you earn £40,000 from self-employment and £15,000 from a PAYE job, your qualifying MTD income is only £40,000, meaning you fall below the £50,000 threshold for 2026 and start in April 2027 instead under the £30k threshold. Check our detailed MTD timeline for full reporting deadlines.
Once you’ve started with MTD, you can only exit after three consecutive years below the threshold (and by claiming exemption), not automatically.
Real-world scenario: Putting MTD into practice
Here is how qualifying income and digital record-keeping work in practice:
Meet Sarah, a freelance graphic designer and landlord. In the 2024/25 tax year, she earned £32,000 from freelance work and £20,000 in rental income (£52,000 total qualifying income). She also earns £5,000 from PAYE employment, which is non-qualifying and excluded. Since her qualifying income exceeds £50,000, Sarah must sign up for MTD for Income Tax starting in April 2026.
Managing digital records with Mettle and FreeAgent: By opening a Mettle business bank account, Sarah gets FreeAgent accounting software included at no extra cost*. Her design invoices and rental income automatically sync, while receipts are captured digitally on the spot. FreeAgent calculates her updates and sends required quarterly summaries directly to HMRC, making compliance effortless.
What should I do next if MTD applies to me?
If Making Tax Digital applies to you, here are the three main changes you need to make:
1. Keep digital records: Track income and expenses using MTD-compatible software. Read our digital record-keeping guide to get started.
2. Submit quarterly updates: Send income and expense summaries to HMRC every three months. Check out our guide to sending your first quarterly update.
3. Complete your final declaration: Submit a final statement by 31 January to finalise adjustments and confirm your tax bill. Learn more about the MTD final declaration.
What these changes mean for you
Moving to MTD might feel like a big step, but it can actually be a really positive thing for your business. The new process can give you:
More control and confidence: Instead of a yearly tax scramble, you'll have an up-to-date view of your finances throughout the year. This helps you understand what's happening with your business and how much tax you might owe, so you're not hit with any surprises.
Fewer errors: Digital record keeping and automated software reduce the risk of human error. This helps you get your tax right and avoid any potential penalties.
More time to focus on your business: With the right software, MTD can help automate a lot of the bookkeeping and tax admin, freeing up your valuable time to focus on the things you love about your business.
Getting ready for MTD doesn't have to be overwhelming. Take the hassle out of tax compliance by opening a free Mettle business bank account today and unlocking FreeAgent at no extra cost to streamline your finances effortlessly***.
*To get FreeAgent for free, customers have to make at least one transaction a month from their Mettle account. If they don’t make one transaction a month, or if their Mettle account is closed and they continue to use FreeAgent then the FreeAgent fees will apply.
