MTD for Income Tax Explained: Understanding Qualifying Income and Key Dates
The UK tax system is moving fully online, and MTD for Income Tax explained simply means understanding what HMRC’s digital reform requires from you. Introduced to modernise tax reporting, Making Tax Digital (MTD) aims to reduce errors and make record-keeping easier for landlords and the self-employed across the UK.
What Is Making Tax Digital for UK Income Tax?
Under MTD for Income Tax, individuals must:
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Keep digital records of income and expenses.
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Use HMRC-approved software such as QuickBooks, Xero, or FreeAgent.
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Submit updates electronically instead of paper returns.
This system ensures accurate, real-time data and replaces traditional Self Assessment filings.
MTD for Income Tax Explained: The Next Phase
The next stage, officially MTD for Income Tax Self Assessment (MTD ITSA), starts in April 2026. It will eventually replace the current Self Assessment process for most sole traders and landlords.
If you earn self-employment or rental income personally (not through a company), you’ll soon need to:
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Keep digital records.
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Submit quarterly updates for each income source.
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File a final annual declaration confirming adjustments and tax owed.
KSM Tip: Join the MTD pilot scheme early to test your software and workflow before 2026. You can do so please contact KSM Consulting Limited if, you wish to join the pilot scheme.
When Will MTD for Income Tax Apply?
| Total Qualifying Income | MTD Start Date |
|---|---|
| Over £50,000 | April 2026 |
| Over £30,000 | April 2027 |
| Over £20,000 | April 2028 |
| Below £20,000 | Continue using Self Assessment |
Your eligibility is based on total qualifying income, not profit.
What Counts as Qualifying Income under MTD for Income Tax?
Qualifying income includes:
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Self-employment turnover (before expenses).
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Personal rental income from property.
It does not include:
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Wages or salaries.
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Dividends or director’s pay.
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Rental income earned through a limited company.
Note: Partnerships aren’t included yet, but HMRC plans to extend MTD later.
Combining Multiple Income Sources
HMRC adds together your self-employment and rental income to work out when you join MTD.
Example 1:
£40,000 self-employment + £20,000 rental = £60,000 → Join MTD April 2026.
Example 2:
£35,000 self-employment + £25,000 salary = £35,000 qualifying income → Join April 2027.
How HMRC Calculates Your Qualifying Income
| MTD Start Date | Tax Year Reviewed | Income Threshold |
|---|---|---|
| April 2026 | 2024/25 | Over £50,000 |
| April 2027 | 2025/26 | Over £30,000 |
| April 2028 | 2026/27 | Over £20,000 |
If your business is new, HMRC annualises your first-year income to decide when you join.
What You’ll Need to Do under MTD for Income Tax
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Keep digital records using approved software.
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Send quarterly updates to HMRC.
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File a final declaration confirming total income and expenses.
This replaces spreadsheets and paper records.
KSM Tip: Adopting software like Xero or QuickBooks early makes the transition smoother and avoids last-minute stress.
Preparing Now for MTD for Income Tax
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Review your income sources to see if you’ll meet the threshold.
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Choose approved software from HMRC’s MTD list.
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Record transactions digitally and in real time.
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Seek professional advice to stay compliant.
KSM Consulting Can Help
At KSM Consulting Ltd, we guide self-employed clients and landlords through every stage of MTD for Income Tax explained:
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Software setup and training.
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Digital record compliance checks.
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Quarterly update filings and annual tax reviews.
Call: 0208 672 3411 Email: info@theksma.co.uk Visit: www.theksma.co.uk
