MTD for Income Tax: The 2026 Rollout Thresholds and Who's Affected
Making Tax Digital for Income Tax phases in based on qualifying income, with the £50,000 threshold now live and the £30,000 tier following. Here's exactly who's in scope and when.
Why MTD for Income Tax is being phased in by threshold
Making Tax Digital for Income Tax Self Assessment (MTD ITSA) represents a fundamental change to how sole traders and landlords report income to HMRC — moving from a single annual tax return to ongoing digital record-keeping and quarterly reporting. Given the scale of this change and the number of small businesses and landlords affected, HMRC is phasing in mandatory participation gradually, starting with the highest-income group and progressively widening the population over several years.
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Open Self-Employed Tax calculatorThe rollout timeline
| Qualifying income threshold | Mandatory from |
|---|---|
| Above £50,000 | April 2026 |
| Above £30,000 | April 2027 |
| Above £20,000 | April 2028 (announced) |
Each threshold is assessed based on your qualifying income in a specified earlier tax year (a look-back basis), giving affected taxpayers advance notice before they're required to comply, rather than a sudden mid-year obligation.
What "qualifying income" actually measures
This is the detail that catches some people out: qualifying income is your gross self-employment and property income combined, not your taxable profit after expenses.
| Scenario | Self-employment turnover | Property income | Combined qualifying income | In scope at £50,000 threshold? |
|---|---|---|---|---|
| Sole trader only | £55,000 | £0 | £55,000 | Yes |
| Landlord only | £0 | £45,000 | £45,000 | No (below £50,000, but would be caught at the £30,000 tier) |
| Both self-employed and a landlord | £30,000 | £25,000 | £55,000 | Yes — combined income crosses £50,000 even though neither source alone does |
A business owner with relatively thin margins but high turnover — for example, a trades business buying significant materials — could be pulled into MTD ITSA based on gross turnover, even if their actual taxable profit is comparatively modest.
What compliance actually involves
Once in scope, the reporting cycle changes substantially compared with a single annual Self Assessment return:
| Requirement | Detail |
|---|---|
| Digital record-keeping | Income and expenses must be recorded using MTD-compatible software (not necessarily a full accounting package — compatible spreadsheets with bridging software can work) |
| Quarterly updates | Summary totals of income and expenses submitted to HMRC roughly every 3 months |
| End-of-period statement | A finalising statement for each self-employment or property business, confirming and adjusting the quarterly figures |
| Final declaration | A year-end declaration confirming total income across all sources, replacing the traditional SA100 |
Who is exempt or excluded
Not everyone with qualifying income above the relevant threshold is required to join immediately or at all:
- Limited companies are entirely out of scope for MTD ITSA — this regime is specifically for sole traders and individual landlords taxed via Self Assessment on unincorporated income.
- Some individuals may qualify for a digital exclusion exemption if they are unable to use digital tools due to disability, age, remoteness of location, or religious belief, similar to exemptions available under MTD for VAT.
- Trusts, estates, and certain other entities have separate treatment and are not part of the initial sole trader/landlord rollout.
Practical steps before your threshold applies
- Identify your qualifying income across all self-employment and property sources combined — not just your main trade — to check which threshold tier you'll fall into and when.
- Choose MTD-compatible software well before your mandatory start date, rather than scrambling in the weeks before your first quarterly deadline.
- Get comfortable with quarterly record-keeping habits — waiting until year-end to reconstruct a full year of transactions becomes much harder under a quarterly reporting cadence.
- Watch for threshold changes — the £30,000 and £20,000 tiers are scheduled but any government could adjust timing or thresholds before they take effect, so revisit your expected status periodically as your income changes.
Use our self-employed tax calculator and sole trader take-home calculator to check your current profit position and plan ahead for when your specific MTD ITSA threshold tier becomes mandatory.
Frequently asked questions
What income threshold brought MTD for Income Tax into effect first?
Sole traders and landlords with qualifying income (gross self-employment and/or property income combined, before expenses) above £50,000 were the first group required to join MTD for Income Tax, from April 2026.
What is the next threshold coming into scope?
Those with qualifying income above £30,000 are required to join from April 2027, with a further reduction to £20,000 announced for April 2028, progressively widening the population required to comply.
What does 'qualifying income' mean for the threshold test?
It means your gross self-employment and property income combined, before deducting any expenses — not your taxable profit. This distinction matters because a business with high turnover but modest profit could still cross the threshold based on gross income alone.
What do businesses in scope actually have to do differently?
They must keep digital records of income and expenses using MTD-compatible software, submit quarterly updates to HMRC summarising income and expenses, and submit a final year-end declaration, replacing the single annual Self Assessment return most had used previously.
Do limited companies have to comply with MTD for Income Tax?
No. MTD for Income Tax applies only to unincorporated sole traders and individual landlords who are subject to Income Tax through Self Assessment on their self-employment and property income — limited companies are not in scope for this specific regime (they follow separate Making Tax Digital for VAT and, eventually, Corporation Tax rules).
Try the calculators
Self-Employed Tax Calculator
Calculate income tax, Class 2 and Class 4 National Insurance for self-employed and sole traders for 2025/26.
Sole Trader Take-Home Pay Calculator 2026/27
Calculate your net take-home pay as a UK sole trader after Income Tax and Class 4 National Insurance. Compare with PAYE employment.
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