What counts as qualifying income for Making Tax Digital?
Qualifying income is your total income from self-employment and property before you take off any expenses, with both added together.
Qualifying income is the figure HMRC compares against the Making Tax Digital thresholds to decide whether the rules apply to you. HMRC defines it as your total income from self-employment and property. This is the amount before expenses, also known as turnover.
Two things about that definition catch people out, and they are the reason most people who guess get the answer wrong:
- It is your income before expenses, not your profit.
- Self-employment and property income are added together, not tested separately.
Qualifying income is turnover, not profit
This is the single most common mistake. People check their profit figure, see it is comfortably under the threshold, and assume the rules do not apply to them.
HMRC does not look at your profit. It looks at what came in before you deducted anything.
Say you are a self-employed joiner. You invoiced £60,000 over the year. After materials, van costs, tools, insurance and everything else, your profit was £20,000. Your qualifying income is £60,000, not £20,000. On that figure you are over the £50,000 threshold, even though you took home a third of it.
The same applies to landlords. If a property brings in £24,000 of rent and the mortgage interest, letting agent fees, repairs and insurance leave you with almost nothing, the qualifying income figure is still £24,000. Costs do not reduce it.
Self-employment and property income are added together
If you have both kinds of income, you add them up and compare the total against the threshold. Neither one has to reach the threshold on its own.
HMRC's own example puts it like this: £25,000 from rental income plus £27,000 from self-employment income gives total qualifying income of £52,000.
So someone earning £30,000 from a trade and £25,000 in rent has qualifying income of £55,000. Both figures are well under £50,000 on their own. Together they are over it, and Making Tax Digital applies.
This is why people with a small side business and a single rental property are often surprised to find they are in scope. Each part looks too small to matter. The total is what counts.
What counts towards qualifying income
Two kinds of income count:
- income from self-employment, if you are a sole trader
- income from property
For property, that includes both UK and foreign property if you are a UK tax resident. HMRC's example is someone who is a sole trader in the UK and also rents out a property in France. Both sources count towards qualifying income.
If you are not a UK tax resident, foreign property income and self-employment income that you have not declared on your UK Self Assessment tax return do not count.
If you use the cash basis and you are VAT registered, you can choose whether to include or exclude VAT when you declare your business income. If you include it, it counts towards your qualifying income.
There are also specific rules for less common situations, such as being the beneficiary of a bare trust or of an interest in possession trust. If that applies to you, check HMRC's guidance for your case.
What does not count
The definition is a closed one. HMRC states that all other sources of income do not count towards your qualifying income, and gives these examples:
- employment income taxed through PAYE
- your share of profit from a partnership as an individual partner
- dividends, including dividends from your own company
- the State Pension
- private pensions
Because the test only covers self-employment and property, anything that is neither of those falls outside it. Interest on savings does not count. Neither do capital gains. Capital Gains Tax is a separate tax on the profit you make when you sell an asset that has gone up in value, so it is not income from a trade or a property.
A worked case: you earn £45,000 in a salaried job, take £8,000 in dividends from a company you own, and receive £12,000 in rent from a flat. Your qualifying income is £12,000. The salary and the dividends are ignored entirely for this test, even though your actual income is far higher.
Note that this test is only about whether Making Tax Digital applies to you. Income that does not count towards qualifying income is still taxable and still has to be reported. Savings and dividends get added at the end of the year when you finish your tax return, rather than in your quarterly updates. See do I still file a Self Assessment tax return.
Jointly owned property
If you own a property with someone else, only your share counts.
HMRC's example is a property owned jointly with a sibling generating £50,000 in income, split equally. Each owner's qualifying income from that property is £25,000, not £50,000.
This matters for couples who own rentals together. A portfolio producing £70,000 of rent split equally gives each owner £35,000 of qualifying income, which is under the £50,000 threshold but over the £30,000 one. There is more on this in Making Tax Digital for landlords.
Which year's figures does HMRC use?
HMRC works out your qualifying income for a tax year by checking the Self Assessment tax return you submitted in the previous tax year. In practice that means the threshold test looks back two tax years from the date you have to start.
| Qualifying income over | In this tax year | You must use Making Tax Digital from |
|---|---|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
The first group is already in. If your qualifying income for the 2024 to 2025 tax year was over £50,000, you should be using Making Tax Digital for Income Tax now.
HMRC reviews your return, and if your income is above the relevant threshold it writes to you confirming that you need to use Making Tax Digital for Income Tax by the start of the next tax year. Even if no letter arrives, you still have to check your own qualifying income and sign up if you are in scope.
That notice can be short. The 2024 to 2025 return had to be filed online by 31 January 2026, and the first group had to be using Making Tax Digital from 6 April 2026, so anyone who filed close to the deadline had about two months. You do not have to wait for HMRC to tell you. As soon as you know your turnover figures for the relevant year, you can work out your own start date.
Partnerships are not in scope yet. HMRC has said partnerships will need to use Making Tax Digital for Income Tax in the future and that it will set out the timeline later.
What if your income drops?
Once you have started using the service, you do not fall straight back out again after one quiet year. If your qualifying income drops below the relevant threshold for 3 tax years in a row, you can choose to opt out.
Working out your own figure
To check where you stand, take your last Self Assessment return and add up:
- your total turnover from self-employment, before any expenses
- your total property income, before any expenses, counting only your share of anything owned jointly
Ignore your salary, your dividends, your pensions, your savings interest and your partnership profit share. Compare the total against the threshold for that tax year in the table above.
If the total is over the threshold, you need to keep digital records and send quarterly updates. This service keeps those records and sends the in-year quarterly updates for self-employment and UK property. It does not handle the end-of-year Final Declaration, which you would need to complete elsewhere.
If you are close to a threshold, or your circumstances are unusual, it is worth checking whether you need to use Making Tax Digital and whether any of the exemptions apply to you.
Last reviewed 25 July 2026. This is general information about how Making Tax Digital works, not tax advice. We are not accountants. If your situation is complicated, speak to one, or check the guidance on GOV.UK.