Who is affected by Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is being phased in from April 2026. It applies to sole traders and landlords, with start dates determined by their level of qualifying income.

The first to be affected are those with income over £50,000, who will need to comply with the new requirements from 6 April 2026, using figures from their 2024–25 tax return.

In the coming tax years, the threshold will drop, meaning sole traders and landlords with lower qualifying incomes are also affected. The implementation is as follows:

What counts as qualifying income for MTD?

Qualifying income for MTD purposes is defined as the total gross income (turnover not profit) from self-employment and UK and foreign property. This is before any expenses or allowances, including the trading allowance or property allowance, and is the total combined income across all relevant sources. It is not assessed per business.

For example, if your 2024-2025 tax return includes:
£26,000 in rental income
£27,000 in trading income
Your total qualifying income = £53,000, meaning Making Tax Digital applies from 6 April 2026.

For new businesses, income is annualised to determine the relevant level.

Income that does not count towards the threshold

Certain income streams do not count towards the threshold when assessing whether you must join MTD:

• Rentaroom income (within the £7,500 relief)
• Income covered by the £1,000 trading allowance or property allowance
• Employment income
• Dividend, savings or pension income

For example, if your 2024-2025 tax return includes:
£48,000 self-employed income
£6,000 from letting a room in your home
£900 from a small hobby business
You would not be mandated into MTD for Income Tax (even though your overall income is above £50,000), as the £6,000 from letting a room would be covered by Rent-a-room relief and the hobby trading income of £900 would be covered by the Trading Allowance. As such, these income streams would not be shown on your tax return and therefore would not form part of the income calculation to mandate MTD for Income Tax.

Staying in or leaving the MTD regime

You will remain within the MTD regime unless your qualifying income falls below the relevant threshold for three consecutive tax years or all sources of reportable income for MTD cease. Only after meeting these conditions can you exit the digital reporting requirements.

Who is not included in Making Tax Digital?

MTD for Income Tax does not apply to partnerships and limited companies.

The Government’s plan to include general partnerships is currently on hold, and it will likely monitor the success of the 2026-2028 rollout and revisit partnerships at a later date.

For companies, the Government has temporarily ruled out extending MTD to Corporation Tax, admitting that one size does not fit all for digital tax purposes, confirming that a different approach will be explored.

There are exemptions from Making Tax Digital for Income Tax, but they are limited. Some are automatic, some are temporary, and some you will need to apply for – such as a digital exclusion exemption if you are unable to use digital tools due to age, disability, remote location or religious beliefs.