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What counts as qualifying income for MTD ITSA?
The threshold test that decides whether you are in scope for Making Tax Digital for Income Tax, how mixed income aggregates, and what happens when your income drops below the threshold.
The short version
Qualifying income is your total gross self-employment and property income combined, before expenses. You are mandated when it goes over £50,000 (from April 2026), £30,000 (April 2027) or £20,000 (April 2028). Employment, savings, dividends and pensions do not count toward it.
What HMRC counts as qualifying income
Qualifying income is the total gross income from self-employment and property, before expenses or tax deductions, combined across all businesses. It is gross turnover, not taxable profit. UK and overseas self-employment and property income both count if you are UK-resident or UK-domiciled.
It does not include PAYE employment income, savings interest, dividends, pensions, capital gains, or other Self Assessment sources. Those still go on your Final Declaration but they do not count toward the threshold.
How mixed income aggregates
If you have both self-employment income and property income, the threshold test adds them together. A sole trader with £35,000 of self-employment turnover and £20,000 of gross rental income has qualifying income of £55,000 - in scope from April 2026.
HMRC uses qualifying income from the most recent filed tax return before the mandate date:
- April 2026 mandate, based on the 2024-25 return (due 31 Jan 2026)
- April 2027 mandate, based on the 2025-26 return (due 31 Jan 2027)
- April 2028 mandate, based on the 2026-27 return (due 31 Jan 2028)
If the reference period is less than 12 months, income is adjusted proportionally.
The threshold cohorts
| Start date | Qualifying income threshold |
|---|---|
| 6 April 2026 | Over £50,000 |
| 6 April 2027 | Over £30,000 |
| 6 April 2028 | Over £20,000 |
The £20,000 threshold was announced at Spring Statement 2025.
What happens if your income drops below the threshold
Once mandated, a taxpayer stays in MTD ITSA even if income drops below the relevant threshold, unless they opt out. The opt-out is available after three consecutive tax years below the applicable threshold, and there is no obligation to opt out.
Practically, that means a one-off bad year does not remove you from MTD; you stay in the regime and keep filing quarterly updates and a Final Declaration each year.
Related reading
Once you know you are in scope, see the quarterly and Final Declaration deadlines and the answer to whether you can keep your spreadsheet. Or return to the Aligned homepage.
In scope? Filing is simpler than it sounds.
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