Last reviewed: 29 September 2026 · Reviewed by IFM's qualified accountant
The test uses income before expenses, not taxable profit. It also combines relevant self-employment and property receipts, so checking one business in isolation can give the wrong answer.
What should you know about the three test years?
For a start on 6 April 2026, HMRC looks at qualifying income reported on the 2024/25 Self Assessment return and the threshold is more than £50,000. This is already the current regime in 2026/27.
For a start on 6 April 2027, HMRC uses the 2025/26 return and the threshold is more than £30,000. For a start on 6 April 2028, it uses the 2026/27 return and the threshold is more than £20,000.
“More than” matters. Income exactly equal to the threshold is not described by GOV.UK as over it. Use the amount on the submitted return and check any amendments.
What should you know about gross income, not profit?
Qualifying income is broadly total turnover from self-employment and gross property income before deducting expenses or the trading or property allowance. A business with £55,000 of sales and £40,000 of costs can be over the £50,000 test despite only £15,000 of accounting profit.
Do not deduct VAT automatically without checking how turnover is reported on the return and the relevant MTD guidance. Do not deduct loan interest, agent fees, materials, mileage or repairs for the threshold test.
The distinction is deliberate: MTD entry tests the scale of receipts, while Income Tax is normally charged on taxable profit after allowable deductions and reliefs.
What should you know about combining sources?
Add gross income from all sole trades and relevant property businesses. If a person has £28,000 from one sole trade and £25,000 of gross property receipts in the test year, the combined £53,000 exceeds the £50,000 threshold even though neither source does so alone.
Multiple properties usually form one UK property business for tax purposes, but ownership and overseas property can require separate analysis. Jointly owned property uses the individual's share of income according to the tax rules.
Partnership turnover is not simply added as though it were sole-trade turnover under the current individual regime, but a partner's separate sole trade and property sources still need checking. Limited-company sales do not become the director's qualifying income.
What should you know about income that is not qualifying income?
Employment salary, pension income, dividends, bank interest and capital gains are not self-employment or property turnover for this test. They can still affect the final tax return and tax bill.
Casual or miscellaneous income may require careful classification. If it is trading income reported as self-employment, it may enter the calculation. If the activity is not a trade, different reporting rules can apply.
The £1,000 trading allowance and £1,000 property allowance do not turn gross receipts above them into a net threshold figure. HMRC's guidance says qualifying income is before expenses.
What should you know about new businesses and missing returns?
MTD normally relies on a previously submitted tax return. A new sole trader or landlord may not enter immediately because HMRC first needs a return showing the source and qualifying income. GOV.UK explains when a new income source must be added and when digital reporting begins.
If a return is late or under enquiry, do not assume MTD is postponed safely. Contact HMRC or the agent, correct the return where necessary and document the start-date conclusion.
A person must already be registered for Self Assessment and normally have submitted a return in the previous two years to sign up through the standard route.
What should you know about below the threshold now?
Someone below the current threshold can volunteer for MTD. Voluntary entry may suit a person who wants one digital process before they become mandated, but software cost, readiness and record quality should be considered.
Volunteers have specific penalty treatment. They must still comply with the digital process they join and should not sign up merely to test a product without understanding the obligations.
If income is close to £30,000 on the 2025/26 return, prepare during 2026/27 for a possible April 2027 start rather than waiting for HMRC's letter.
What should you know about falling below the threshold after entry?
Once in MTD, one low-income year does not automatically remove the obligation. HMRC's current guidance generally uses three consecutive years at or below the relevant threshold before the person can opt out, subject to the detailed conditions and process.
Continue digital records and quarterly updates until HMRC confirms or the online process shows that opting out is available. A cessation of all qualifying income sources has a separate process.
Temporary fluctuations should therefore be planned within the MTD system rather than switching records on and off annually.
What should you know about exemptions and exclusions?
Digital exclusion can support an exemption where it is not reasonable or practical to use digital tools because of age, disability, location, religion or another accepted reason. Some people are automatically exempt under HMRC's categories.
The threshold test and exemption test are separate. A person can be above the income threshold but exempt from digital obligations, while remaining required to report and pay tax through another route.
Apply or confirm the exemption formally. Keep HMRC's decision and tell an agent about it.
What should you know about a threshold worksheet?
For the relevant return, list each sole trade, UK property business and overseas property business. Record gross receipts exactly as reported, ownership shares, source classification and any amended figures. Add the qualifying amounts and compare the total with the threshold for that test year.
Then record the resulting MTD start date, software choice, agent authorisation and four quarterly deadlines. Review again when the next return is completed.
Do not use bank deposits alone as turnover: loans, capital introduced, transfers and refunds may not be income, while cash receipts can be missing from the bank total.
What should you know about the result drives preparation?
If the test puts you in MTD, create digital records from the required start date, not from the first quarterly deadline. Choose compatible software, authorise it and plan how each source will be maintained.
See sole trader and landlord support for the relevant service page. Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What should you know about common threshold mistakes?
Do not use profit after expenses, one bank account or a single property. Do not subtract the trading allowance, property allowance or mortgage interest before testing gross qualifying income.
Check amended returns and ownership changes. Income from a jointly owned property belongs in the calculation according to the individual's tax share, while company turnover belongs to the company.
Record why an amount was included or excluded. This makes it easier to explain the start date to HMRC and prevents the same classification question returning when the next threshold is tested.
What should you know about confirm the outcome?
Use HMRC's online checker and compare the result with correspondence. If the two differ, contact HMRC before the digital start date.
Keep the worksheet with the relevant tax return. A later amendment can change qualifying income and should trigger another review of the start date.
What should you read next?
Use the Deadline Finder for standard first accounts, first confirmation statement and Corporation Tax dates. For VAT, payroll, personal tax and other obligations, check the tax deadlines calendar and your official records.
What do people also ask about this topic?
What should you know about the three test years?
For a start on 6 April 2026, HMRC looks at qualifying income reported on the 2024/25 Self Assessment return and the threshold is more than £50,000. This is already the current regime in 2026/27.
What should you know about gross income, not profit?
Qualifying income is broadly total turnover from self-employment and gross property income before deducting expenses or the trading or property allowance. A business with £55,000 of sales and £40,000 of costs can be over the £50,000 test despite only £15,000 of accounting profit.
What should you know about combining sources?
Add gross income from all sole trades and relevant property businesses. If a person has £28,000 from one sole trade and £25,000 of gross property receipts in the test year, the combined £53,000 exceeds the £50,000 threshold even though neither source does so alone.
What should you know about income that is not qualifying income?
Employment salary, pension income, dividends, bank interest and capital gains are not self-employment or property turnover for this test. They can still affect the final tax return and tax bill.
Which official sources support this guide?
- https://www.gov.uk/guidance/find-out-if-and-when-you-need-to-use-making-tax-digital-for-income-tax
- https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/before-you-use-this-guide
- https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/add-or-cease-income-sources
General guidance, not advice for your situation.
