How qualifying income works for Making Tax Digital

The most common surprise is that costs do not reduce the figure. HMRC's press release of 5 October 2026 describes the measure as gross self-employment and property income before any tax allowances or expenses are deducted. A landlord with heavy mortgage interest and repair bills, or a builder who spends most of what comes in on materials, may make a modest profit and still be well over a threshold.

The figure is taken from a tax return you have already sent. HMRC used 2024 to 2025 returns to decide who joined from April 2026, it is using 2025 to 2026 returns for April 2027, and it will use 2026 to 2027 returns for April 2028. That means the income you are earning now can decide your position more than a year ahead.

Self-employment and property income are combined. GOV.UK's own example is someone with £25,000 from rental income and £27,000 from self-employment income, whose total qualifying income is £52,000. Neither source on its own would have passed the original threshold, but together they do.

For UK residents, foreign property income counts alongside UK property, so a sole trader in Sussex who also lets an apartment in France adds both. For someone who was not UK resident, UK property income counts but foreign property income does not.

If one source stopped during the year but another carried on, the income from the source that stopped still counts. GOV.UK's example is a property sold during 2024 to 2025 while self-employment continued.

The following do not count towards qualifying income, according to GOV.UK:

• employment income taxed through PAYE
• dividends, including those from your own company
• the State Pension and private pensions
• your share of profit from a partnership as an individual partner
• transition profits from basis period reform
• one-off UK land transactions that fall within a single tax year

So a director who pays themselves a salary and dividends, with no rental income or sole trade, is not brought in however much they earn. A higher earner with a large salary and a small amount of rent would look only at the rent. Our guide to paying yourself from a limited company covers that position from the company side.

If you own property jointly, only your share of the income counts. GOV.UK gives the example of property income of £50,000 split equally with a sibling, which gives each owner qualifying income of £25,000. If you only learn your share after expenses, that figure is the one used. Our Making Tax Digital for landlords guide explains the simpler record keeping rules for joint lettings.

Partnership profit shares are outside the figure, and HMRC has said it will set a timeline for partnerships later. Self-employment or property income that you receive personally, outside the partnership, still counts in the usual way.

A few situations need a closer look:

• Cash basis traders can choose whether to include VAT in business income, and if they include it, it counts.
• Sole traders with a short or unusual accounting period may have their income annualised by HMRC, where it has the information. Landlords in that position must annualise property income themselves.
• An amended return can change the answer. A change made before a tax year starts that takes you over the threshold means you are in for that year, while a change made after the year starts can only take you out, not in.
• Income covered by qualifying care relief does not count.

If qualifying income drops below the relevant threshold for 3 tax years in a row after you have started, you can opt out. This is general information rather than tax advice, and the GOV.UK qualifying income page has further examples.

The quickest check is to find the turnover box on the self-employment pages of your last return and the total rents and other property income on the property pages, then add them, using only your share of anything jointly owned. If the answer is close to a threshold, it is worth asking whether you are approaching the next one too, because the thresholds are falling. The Making Tax Digital service page explains how people get help once they are in.

If you would like someone to look at your figures, we read every enquiry and, where we can, will put you in touch with a local accountant. See how it works.