Making Tax Digital — Who It Affects
Am I affected by MTD?
Making Tax Digital applies based on your gross income — not your profit. Here’s how to work out whether it applies to you, and when.
Who does MTD apply to?
MTD for Income Tax applies to sole traders and landlords. Whether it applies to you depends on your qualifying income — the combined gross (before expenses) income from self-employment and UK property.
It is your turnover, not your profit, that determines whether you are caught. If you earn £55,000 in sales but only make £10,000 profit after expenses, MTD still applies.
The three phases
Phase 1 — Live now from April 2026
Gross income over £50,000
Based on your 2024-25 tax return. HMRC has already written to approximately 864,000 people in this group. If you received a letter, you are mandated — you cannot opt out.
Phase 2 — April 2027
Gross income over £30,000
Based on your 2025-26 tax return.
Phase 3 — April 2028 (provisional)
Gross income over £20,000
Based on your 2026-27 tax return. Not yet confirmed in legislation.
What counts as qualifying income?
Qualifying income is the combined gross income from:
✓ Self-employment income
Your total trading income before any expenses or allowances.
✓ UK property income
Your total rental income before mortgage interest, agent fees or repairs.
✗ What does NOT count
Employment (PAYE) income, pension income, dividends, bank interest, and capital gains do not count towards the threshold.
Example
A freelancer earning £35,000 from their business and £20,000 in rental income has qualifying income of £55,000 — caught in Phase 1 from April 2026, even though neither income source alone exceeds £50,000.
Who is exempt?
Partnerships, limited companies, trustees, and non-resident companies are not included in any announced phase. Individuals who genuinely cannot use digital tools may apply to HMRC for a digital exclusion exemption — but this is not available simply for those who prefer not to go digital.