What income counts toward the £50,000 MTD ITSA threshold?

Qualifying income is your total GROSS (before expenses) self-employment income plus UK property income plus foreign property income (if you're UK tax resident). It explicitly does NOT include PAYE/employment income, dividends, pensions, state pension, REITs/PAIFs, qualifying care relief, or partnership profits received as a partner. Self-employment that a partnership passes to you personally DOES count.

Are partnerships in scope for MTD ITSA?

Not yet. Your share of partnership profits as an individual partner is explicitly excluded from qualifying income for MTD ITSA. HMRC has not yet announced a firm date for partnerships entering MTD - the original plan deferred them indefinitely after the 2023 timeline reset. Any personal self-employment or property income you have on top is treated separately and can still trigger MTD ITSA.

I have £40,000 self-employment and £15,000 rental income - am I in scope from April 2026?

Yes. Qualifying income aggregates self-employment + property = £55,000 gross, above the £50,000 April 2026 threshold. The threshold tests your total qualifying income, not each source independently. From April 2027 the threshold drops to £30,000 - so even £25k self-employment + £10k rental triggers MTD.

Can I get an exemption from MTD ITSA?

Yes for several categories. Automatic exemptions: qualifying income £20,000 or below, no NI number, non-resident companies (SA700), trusts (SA900), personal representatives of deceased, Lloyd's underwriters. Applied exemptions (need HMRC approval): digital exclusion on age / health / disability / religious belief / genuine no-internet grounds. Temporary exemptions until April 2027: averaging relief claimants, qualifying care relief, trust/estate income (SA107), residence/remittance basis (SA109).

What if my qualifying income changes between years?

HMRC tests qualifying income against your most recent Self Assessment return. So 2026/27 MTD eligibility is based on income reported on your 2024/25 Self Assessment (filed by 31 January 2026). If you crossed £50,000 on the 2024/25 return, you're in MTD from 6 April 2026. If your income later drops below the threshold you stay in MTD by default - the original 2021 regulations (SI 2021/1076) set the exit floor at £10,000. HMRC has indicated the floor will track the qualifying-income threshold but the amending statutory instrument has not yet been published - check the gov.uk MTD timeline for the current rule each year.

Can I sign up to MTD ITSA voluntarily before I'm required?

Yes. HMRC accepts voluntary signups for sole traders + landlords below the qualifying-income threshold. Voluntary users get the same quarterly-update mechanics but penalties for late submission are softer (separate volunteer penalty regime). Useful if you want to road-test your software workflow with the accountant a year before going compulsory.

What is 'digital exclusion' as an MTD exemption?

Per HMRC: any reason it's not reasonable for you to use compatible software to keep digital records or send quarterly updates or submit your tax return. Valid grounds include age, health conditions, disability, religious beliefs incompatible with digital communication, or genuine internet-access barriers (e.g. no broadband in a remote area). You apply for the exemption through HMRC - it's not automatic. Approval is by HMRC discretion based on individual circumstances.

MTD ITSA Who Needs to Comply 2026/27: Thresholds + Exemptions

Do you need to use Making Tax Digital for Income Tax? Decision guide - £50k qualifying income from April 2026, £30k from April 2027, £20k from April 2028. Full exemptions list + qualifying income definition.

Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory on 6 April 2026 for sole traders + landlords with qualifying income over £50,000. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. This guide walks through who's actually in scope, the exact definition of "qualifying income", and the full list of exemptions - the tactical detail behind the broader MTD ITSA overview guide.

The 3 trigger thresholds

You're in scope from:

| Tax year | Qualifying income threshold | |---|---| | 2026/27 (from 6 April 2026) | Over £50,000 | | 2027/28 (from 6 April 2027) | Over £30,000 | | 2028/29 (from 6 April 2028) | Over £20,000 |

HMRC tests your threshold against your most recent Self Assessment return. So your 2026/27 MTD eligibility is determined by your 2024/25 return (filed by 31 January 2026). If you crossed £50,000 on that return, you join MTD on 6 April 2026.

What is "qualifying income"?

Per HMRC: the total income you get in a tax year from self-employment and property, assessed on gross income (before expenses).

Income that COUNTS

Self-employment trading income (gross, before expenses)
UK property rental income (gross, before expenses)
Foreign property income (if you're UK tax resident)
Furnished holiday let income (treated as property income)
Self-employment income that a partnership pays you personally

Income that does NOT count

PAYE / employment income
Dividends (from listed shares or private companies)
Pensions (including State Pension)
Bank / building society interest
UK REITs or PAIFs income
Qualifying care relief income (foster carers, etc)
Partnership profits received as an individual partner
Basis period reform transition profits
One-off UK land transactions (single-tax-year disposals, per HMRC qualifying-income guidance)

Crucial distinction on partnerships: your share of partnership profits as a partner does not count toward your personal MTD threshold. But any personal sole-trade or property income you have on the side is tested separately and can still trigger MTD.

Worked examples - in scope or not?

Example A - Sole-trade plumber

Self-employment gross: £55,000
Bank interest: £200
Qualifying income: £55,000 (interest excluded)
April 2026 MTD: In scope

Example B - Landlord with 3 buy-to-lets

UK rental gross: £42,000
PAYE day job: £40,000
Qualifying income: £42,000 (employment excluded)
April 2026 MTD: Not in scope (£42k < £50k)
April 2027 MTD: In scope (£42k > £30k threshold)

Example C - Mixed self-employed + landlord

Freelance gross: £35,000
UK rental gross: £18,000
Qualifying income: £53,000 (aggregated)
April 2026 MTD: In scope

Example D - Partner with side rental

LLP partnership profit share: £80,000
Personal rental gross: £15,000
Qualifying income: £15,000 (LLP share excluded)
April 2026 MTD: Not in scope (£15k < £50k)
April 2027 MTD: Not in scope (£15k < £30k)
April 2028 MTD: Not in scope (£15k < £20k)

Example E - Self-employed with stepping income

2024/25 self-employed gross: £55,000 (triggered MTD entry April 2026)
2026/27 self-employed gross: £30,000 (would not trigger now)
April 2026 MTD: In scope - you stay in by default. The original SI 2021/1076 set an exit floor of £10,000. Check the gov.uk MTD timeline for the latest exit rule when your income drops materially below the qualifying-income threshold.

Full exemptions list

Automatic exemptions (no application needed)

Qualifying income £20,000 or below
No National Insurance number before the tax year begins
Non-resident companies (those that file SA700)
Trusts (those that file SA900) - includes charitable trusts
Personal representatives of deceased individuals
Lloyd's underwriters (those that file SA103L)
Anyone unable to provide information due to physical / mental incapacity with formal power of attorney or legal guardianship

Temporary exemptions (until April 2027)

These apply if your 2024/25 return includes:

Averaging relief claim (farmers + creative professionals)
Qualifying care relief (foster carers)
Trust / estate income (SA107)
Residence / remittance basis information (SA109)

After 2026/27 these groups may join MTD - check the gov.uk timeline at the start of each tax year.

Long-term exemptions (beyond April 2027)

These groups remain exempt until HMRC announces a date:

Ministers of religion
Recipients of Married Couple's Allowance (note: MCA applies only to those born before 6 April 1935 - so this exemption is in practice a very narrow group of taxpayers aged 90+)
Recipients of Blind Person's Allowance
Partnerships (no entry date announced)

Applied exemptions (HMRC discretion)

The digital exclusion exemption covers anyone for whom it's not reasonable to use compatible software. Valid grounds per HMRC:

Age (no fixed cutoff - assessed individually)
Health conditions
Disability
Religious beliefs incompatible with digital communication
Genuine internet-access barriers (e.g. no broadband in a remote area)

You apply for this through HMRC and approval is at HMRC's discretion. Don't assume you qualify - submit early with supporting evidence.

Sole traders + landlords below the qualifying-income threshold can opt in voluntarily. Mechanics are the same (4 quarterly updates + final declaration via compatible software) - see the MTD ITSA quarterly deadlines guide for the timing.

Penalties for voluntary users follow a separate softer regime - see HMRC's Penalties for ITSA volunteers guidance.

Worth considering if:

You're £5-10k below threshold and likely to cross it on the next year's income growth
You want to road-test your accountant's MTD workflow before it's compulsory
You're already using cloud accounting software (FreeAgent, QuickBooks, Xero) so the marginal effort is small

What to do now

If your 2024/25 qualifying income was over £50,000:

Check the figure on your 2024/25 SA return (filed January 2026)
Confirm you don't qualify for an exemption (automatic, temporary or applied)
Choose MTD-compatible software - see the HMRC list
Sign up via the gov.uk MTD portal
Set 5 calendar reminders for 2026/27: 7 Aug 2026, 7 Nov 2026, 7 Feb 2027, 7 May 2027, 31 Jan 2028

Making Tax Digital for Income Tax 2026 - the full overview - rules, software, signup process
MTD ITSA quarterly deadlines + penalties 2026/27 - exact submission dates and the points-based penalty regime
UK Class 2 + Class 4 NI for self-employed 2026/27 - the contributions side of self-employed compliance
Self-employed calculator - work out take-home including Class 2 + Class 4 NI

Frequently asked questions

What income counts toward the £50,000 MTD ITSA threshold?: Qualifying income is your total GROSS (before expenses) self-employment income plus UK property income plus foreign property income (if you're UK tax resident). It explicitly does NOT include PAYE/employment income, dividends, pensions, state pension, REITs/PAIFs, qualifying care relief, or partnership profits received as a partner. Self-employment that a partnership passes to you personally DOES count.
Are partnerships in scope for MTD ITSA?: Not yet. Your share of partnership profits as an individual partner is explicitly excluded from qualifying income for MTD ITSA. HMRC has not yet announced a firm date for partnerships entering MTD - the original plan deferred them indefinitely after the 2023 timeline reset. Any personal self-employment or property income you have on top is treated separately and can still trigger MTD ITSA.
I have £40,000 self-employment and £15,000 rental income - am I in scope from April 2026?: Yes. Qualifying income aggregates self-employment + property = £55,000 gross, above the £50,000 April 2026 threshold. The threshold tests your total qualifying income, not each source independently. From April 2027 the threshold drops to £30,000 - so even £25k self-employment + £10k rental triggers MTD.
Can I get an exemption from MTD ITSA?: Yes for several categories. Automatic exemptions: qualifying income £20,000 or below, no NI number, non-resident companies (SA700), trusts (SA900), personal representatives of deceased, Lloyd's underwriters. Applied exemptions (need HMRC approval): digital exclusion on age / health / disability / religious belief / genuine no-internet grounds. Temporary exemptions until April 2027: averaging relief claimants, qualifying care relief, trust/estate income (SA107), residence/remittance basis (SA109).
What if my qualifying income changes between years?: HMRC tests qualifying income against your most recent Self Assessment return. So 2026/27 MTD eligibility is based on income reported on your 2024/25 Self Assessment (filed by 31 January 2026). If you crossed £50,000 on the 2024/25 return, you're in MTD from 6 April 2026. If your income later drops below the threshold you stay in MTD by default - the original 2021 regulations (SI 2021/1076) set the exit floor at £10,000. HMRC has indicated the floor will track the qualifying-income threshold but the amending statutory instrument has not yet been published - check the gov.uk MTD timeline for the current rule each year.
Can I sign up to MTD ITSA voluntarily before I'm required?: Yes. HMRC accepts voluntary signups for sole traders + landlords below the qualifying-income threshold. Voluntary users get the same quarterly-update mechanics but penalties for late submission are softer (separate volunteer penalty regime). Useful if you want to road-test your software workflow with the accountant a year before going compulsory.
What is 'digital exclusion' as an MTD exemption?: Per HMRC: any reason it's not reasonable for you to use compatible software to keep digital records or send quarterly updates or submit your tax return. Valid grounds include age, health conditions, disability, religious beliefs incompatible with digital communication, or genuine internet-access barriers (e.g. no broadband in a remote area). You apply for the exemption through HMRC - it's not automatic. Approval is by HMRC discretion based on individual circumstances.