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What Counts as Qualifying Income for MTD for Income Tax?

Short answer: Qualifying income is your total income from self-employment and property before expenses (turnover), based on the Self Assessment return you submitted for the previous tax year. HMRC assesses it, and GOV.UK says you should check it yourself too.

What counts

• Self-employment income (turnover), from all your sole-trader businesses added together.
• Property income (rent). GOV.UK has separate notes on how tax residence affects what counts for UK and foreign income; check them.
• Your share of income from a jointly owned property.
• Income treated as trading profits under the "transactions in UK land" rules, where it is a continuing source over more than one tax year.
• Disguised investment management fees and income-based carried interest.
• If you use the cash basis and are VAT-registered, you can choose to include or exclude VAT when declaring income; if included, it counts.

What does not count

• Employment income (PAYE).
• Your share of profit from a partnership as an individual partner (you still report it on your tax return).
• Dividends, including from your own company.
• State Pension and private pensions.
• Income from UK REITs or PAIFs.
• Basis period reform transition profits.
• Qualifying care relief.
• One-off transactions in UK land.
• Averaging relief does not change qualifying income.

Worked examples (made-up figures except where stated)

1. Two sources. £25,000 rent plus £27,000 self-employment turnover = £52,000 (this is the example on GOV.UK).
2. Salary plus side income. £40,000 PAYE salary plus £12,000 self-employment turnover = £12,000 qualifying income. The salary does not count.
3. Joint property. A property earns £50,000, split equally with a sibling who has no other income. Your qualifying income is £25,000 (GOV.UK example). If you only receive notice of your share after expenses, HMRC assesses that figure.
4. Short first year. If a sole trader traded for six months in the first tax year, HMRC says it will annualise (double) the income if it has the information. Landlords must annualise property income themselves.

Gross, not profit

A common mistake is comparing profit with the threshold. The threshold is about turnover. Check your own Self Assessment figures for the relevant year.

If you change your return later

GOV.UK has a section on amending a submitted Self Assessment return. In summary: a change made after the start of a tax year that takes you above the threshold is not considered for that year. If you have already signed up and a change takes you below it, you can continue voluntarily or opt out. Read the GOV.UK section for your case.

If all your income has ceased

GOV.UK says that if all your self-employment and property income ceased before 6 April 2026, you will not need MTD, but you must tell HMRC and still submit a return. If all sources ceased since your last return, tell HMRC before the start of the next tax year.

Opting out

Once in MTD, if qualifying income drops below the threshold for three tax years in a row, GOV.UK says you can choose to opt out.

FAQ

Does a partnership share count? Not as an individual partner. It stays on your tax return.

Do trading allowance amounts count? GOV.UK says if you claimed the trading income allowance on your last return, you will need digital records if your income was above the allowance and declared. See the guide to digital records.

Where do I check? Use GOV.UK's tool.

What we could not verify

• Edge cases (trusts, non-residents, transactions in UK land) are summarised from GOV.UK and may need adviser input.
• How HMRC treats a specific return amendment in your case.

Sources (GOV.UK / HMRC)

• GOV.UK, Work out your qualifying income for Making Tax Digital for Income Tax — https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax (last updated 11 September 2026; read 17 October 2026)
• GOV.UK, Find out if and when you need to use Making Tax Digital for Income Tax — https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax (page last updated 26 March 2026; read 17 October 2026)
• GOV.UK, Use Making Tax Digital for Income Tax: Create digital records — https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/create-digital-records (read 17 October 2026)

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Not tax advice. Examples use made-up figures. Nothing here has been reviewed by a tax professional. See the disclosure.