Is My Business Affected by Making Tax Digital?
November 25, 2025 • Making Tax Digital
Not every UK business needs Making Tax Digital (MTD) compliance. Whether MTD applies to you depends on your business structure, income level, and the tax year. Here is how to know if you are affected.
Quick Answer
MTD for Income Tax applies to you if:
- You are a sole trader or landlord (not a limited company)
- Your total self-employment or property income exceeds £50,000 (from April 2026) or £30,000 (from April 2027)
- Income is measured from the tax year before your compliance deadline
Limited companies, partnerships, and employed individuals with no self-employment income are not affected by MTD for Income Tax.
Who MTD For Income Tax Applies To
Making Tax Digital for Income Tax is specific to certain business structures and income types.
Affected Business Types
Sole traders - Self-employed individuals trading under their own name or a business name. This includes freelancers, consultants, contractors, carers and any self-employed professional.
Landlords - Individuals earning rental income from property. This applies whether you have one property or multiple properties.
Mixed income earners - People who combine self-employment with property income. Your total qualifying income from both sources determines if MTD applies.
Not Affected Business Types
Limited companies - If you operate through a limited company, you file corporation tax returns. MTD for Income Tax does not apply to you. Companies have separate MTD requirements for VAT if VAT-registered.
Partnerships - Business partnerships have different MTD rules and timelines. If you operate as a formal partnership, check HMRC's specific partnership guidance.
Employed individuals only - If you receive all income through PAYE employment with no self-employment or property income, MTD for Income Tax does not apply to you.
Below threshold - If your self-employment or property income is under £30,000, MTD does not currently apply (though you can choose to use digital bookkeeping software voluntarily).
The Income Thresholds
MTD applies when your qualifying income crosses specific thresholds.
What Counts as Qualifying Income
Self-employment income - All revenue from your sole trader business before expenses. If you invoice £60,000 in a tax year, your qualifying income is £60,000 even if your profit after expenses is £30,000.
Property income - Total rental income before expenses. If you receive £24,000 in rent annually, your qualifying income is £24,000.
Combined income - If you have both self-employment and property income, add them together. £35,000 from consultancy plus £20,000 from rent equals £55,000 qualifying income.
What Does Not Count
Employment income (PAYE) - Salary from employed work does not count toward MTD thresholds. You could earn £100,000 in PAYE employment and £25,000 self-employed, and only the £25,000 counts for MTD purposes.
Investment income - Dividends, interest, and capital gains do not count toward MTD income thresholds.
Pension income - State or private pensions are not qualifying income for MTD.
The April 2026 Threshold: £50,000
From 6 April 2026, MTD becomes mandatory if your total self-employment or property income exceeded £50,000 in the 2024/25 tax year.
How to Check
Look at your 2024/25 Self Assessment tax return (the return you submit by 31 January 2026). Find:
- Box for self-employment turnover
- Box for UK property income
Add these figures together. If the total is over £50,000, you are in the April 2026 group.
Timing Matters
The measurement year is 2024/25, but compliance starts in 2026/27. This gives you time to prepare between when you know you are affected and when you must comply.
Example: Sarah's consultancy earned £58,000 in 2024/25. When she files her January 2026 Self Assessment, she confirms she is over the threshold. She then has until April 2026 to implement MTD-compatible record-keeping before her first quarterly submission is due in August 2026.
The April 2027 Threshold: £30,000
From 6 April 2027, the threshold drops to £30,000. If your 2025/26 income is between £30,000 and £50,000, you enter MTD compliance from April 2027.
Who This Affects
Growing businesses - Sole traders whose income has increased from under £50,000 to over £30,000.
Part-time self-employment - People who combine employment with self-employment may fall into this bracket.
Multiple small income sources - Someone with £20,000 from consultancy and £15,000 from property rental totals £35,000.
Planning Ahead
If your income is currently £28,000 but growing, assume you will be in the April 2027 group. Preparing for MTD voluntarily in 2026 means the transition is already complete when mandatory compliance arrives.
Special Cases
Income Fluctuates Year to Year
If your income varies significantly, you might cross in and out of MTD requirements.
Above threshold one year, below the next - Once you enter MTD, you generally continue even if income later drops below the threshold. Check HMRC guidance for your specific situation.
Just under threshold - If you earn £48,000 in 2024/25, you are not required to use MTD from April 2026. However, if you earn £52,000 in 2025/26, you enter MTD from April 2027.
Multiple Self-Employment Businesses
If you run two separate sole trader businesses, combine the income from both. You cannot split them to stay under the threshold.
Example: James runs a photography business (£30,000) and a web design business (£25,000). His total qualifying income is £55,000, so he falls under April 2026 requirements.
Mix of Rental Properties
All rental income counts together, regardless of how many properties you own or whether they are residential or commercial.
Example: Rachel owns three rental properties generating £12,000, £8,000, and £14,000 respectively. Her total property income is £34,000, bringing her into the April 2027 group.
What If You Are Not Sure?
If your income is close to either threshold or you have complex income sources, there are ways to clarify your position.
Check Your Previous Tax Return
Your most recent Self Assessment tax return shows your self-employment turnover and property income. These figures tell you whether MTD will apply.
Use HMRC's Eligibility Checker
HMRC provides an online tool to check MTD eligibility. Search "HMRC Making Tax Digital eligibility" to find their official checker.
Assume You Will Need It
If you are within £5,000 of either threshold, prepare for MTD anyway. Income growth or a one-off project could push you over the threshold unexpectedly.
Voluntary MTD Adoption
You can choose to use MTD-compatible software and submit quarterly updates even if you are not required to.
Why Consider Voluntary Adoption
Better organised records - Digital record-keeping is typically more reliable than paper systems.
Preparation for future growth - If your income is growing, you will need MTD eventually. Starting early removes future pressure.
Simplified tax management - Quarterly reviews keep you aware of your tax position throughout the year rather than scrambling at year-end.
No additional cost - If you are already considering accounting software for better bookkeeping, MTD-compatible software costs the same.
How to Adopt Voluntarily
Choose MTD-compatible software and begin recording income and expenses digitally. You can submit voluntary quarterly updates to HMRC or simply use the software for your own record-keeping until MTD becomes mandatory for you.
What Being "Affected" Actually Means
If MTD applies to you, three things change:
-
Digital record-keeping becomes mandatory - You must keep income and expense records in software that links to HMRC systems.
-
Quarterly submissions replace annual reporting - You submit income and expense summaries four times per year instead of once.
-
Software choice matters - Not all bookkeeping software is MTD-compatible. You need software specifically recognised by HMRC.
You can still keep paper receipts, but your actual transaction records must exist digitally. You can still involve an accountant, but the digital records are your responsibility.
Action Steps
Determine your MTD status:
- Find your 2024/25 self-employment and property income figures (from your tax return or accounting records)
- Add these figures together to get your total qualifying income
- Compare to £50,000 - if over, you are in the April 2026 group
- If under £50,000, compare to £30,000 - if over, you are in the April 2027 group
- If under £30,000, MTD does not currently apply but monitor your income growth
If MTD applies to you, begin researching compatible software options now. Compliance deadlines are approaching.
The Bottom Line
MTD for Income Tax applies to UK sole traders and landlords whose income exceeds specific thresholds. The requirement is based on your previous year's income, not your current year.
Most sole traders will know from their tax returns whether they are affected. If your self-employment or property income exceeded £50,000 in 2024/25, April 2026 compliance is mandatory. If your income is between £30,000 and £50,000, expect April 2027 compliance.
The key is checking your actual figures rather than estimating. Your Self Assessment tax return provides definitive numbers for determining MTD applicability.
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