The £50,000 MTD Threshold Isn’t as Simple as It Sounds

Think you are outside Making Tax Digital because your business does not make £50,000? It may not be that simple. For MTD, HMRC looks at qualifying income — your gross income from self-employment and property before expenses, rather than your profit after costs. If you have several sources, they can be combined. For example, £27,000 from self-employment and £25,000 from rental income would give you £52,000 of qualifying income.

But some income that you might expect to count does not form part of the calculation. PAYE employment income, dividends — including dividends from your own company — State Pension and private pensions are excluded. Income from jointly owned property can count, however, making the calculation less straightforward for people with several income sources.

There is another detail that can catch people out: the threshold is based on the previous tax year’s qualifying income, not simply what you expect to earn this year. For the first MTD phase, qualifying income above £50,000 in 2024–25 means using MTD from 6 April 2026. So before deciding that MTD does or does not apply to you, check what HMRC considers your qualifying income.