Who is affected by Making Tax Digital for Income Tax?
Making Tax Digital (MTD) for Income Tax will be introduced in stages starting from April 2026. It applies to sole traders and landlords, with the start date depending on their level of qualifying income.
From 6 April 2026, individuals with qualifying income over £50,000 will be required to comply. This will be based on figures reported in their 2024 / 2025 tax return.
Over the following years, the income threshold will gradually decrease, bringing more taxpayers into the MTD regime:
|
Start date |
Who is affected |
Income threshold |
Based on tax year |
|
6 April 2026 |
Sole traders & landlords |
Over £50,000 |
2024-25 |
|
6 April 2027 |
Sole traders & landlords |
Over £30,000 |
2025-26 |
|
6 April 2028 |
Sole traders & landlords |
Over £20,000 |
2026-27 |
What counts as qualifying income?
For MTD purposes, qualifying income is your total gross income (turnover, not profit) from:
1. Self employment and UK and overseas property
This is calculated before expenses or allowances and includes combined income across all sources , not per individual business.
For new businesses, income is annualised to determine whether thresholds are met.
What income is excluded?
Some types of income are not included when calculating the MTD threshold:
1 1 Rent-a-room income (within the £7,500 relief)
2 Income covered by the £1,000 trading or property allowance
3 Employment income
4 Dividends, savings or pension income
Staying in or leaving MTD:
Once you are within the MTD system, you will remain in it unless:
1 Your qualifying income falls below the threshold for 3 consecutive tax years or you no longer have any reportable income under MTD. Only then can you exit the regime.
Who is not included?
MTD for Income Tax currently does not apply to:
- Partnerships
- Limited companies
Plans to extend MTD to partnerships are on hold, and the Government has confirmed that Corporation Tax will not be included for now, with alternative approaches under consideration.
Are there any exemptions?
Yes, but they are limited. Some exemptions are automatic, while others require an application. You may qualify for exemption if you are digitally excluded, for example due to age, disabiliy, remote location and religious reasons.
Need help preparing for MTD?
If you need guidance or support with Making Tax Digital to ensure a smooth transition to digital reporting contact us info@accountica.com