Your Brand
who does making tax digital for income tax apply to
#Landlord#Making Tax Digital#Property Management
Blog

Who Does Making Tax Digital for Income Tax Apply To?

To find out if Making Tax Digital for Income Tax applies to you, you need to calculate your qualifying income sources accurately. …

R
RentalBux
November 6, 2025

To find out if Making Tax Digital for Income Tax applies to you, you need to calculate your qualifying income sources accurately. Your eligibility depends on gross income from self-employment and property only; employment income, pensions, and dividends don’t count toward the MTD for Income Tax thresholds.

Understanding your position early will enable strategic planning. You can prepare systems gradually, choose voluntary participation to gain experience, or structure your affairs to manage threshold interactions more effectively.

Who Will Be Affected by MTD?

The following groups are within MTD for Income Tax eligibility:

1. Self-Employed Individuals operate businesses in their own names, including tradespeople, consultants, freelancers, and professionals who invoice clients directly. Your self-employment income includes all business turnover before expenses from one activity or multiple trading streams.
2. Landlords earn rental income from residential or commercial properties in the UK or overseas. This covers buy-to-let landlords, room renters above the rent-a-room threshold, and commercial property owners. Your rental income includes rent, service charges, and property-related income before deducting expenses.
3. Individuals with combined Income for MTD for Income Tax, both landlords and self-employed individuals, are the same person. HMRC will aggregate your qualifying income from both income sources to test against the compliance thresholds.
You’ll need to comply if MTD for Income Tax thresholds are met – combined gross income from these sources reaches £50,000 or more per year from April 2026, with the threshold reducing to £30,000 from April 2027 and £20,000 from April 2028. Once you meet these thresholds, you’ll be required to maintain digital records and submit quarterly updates using compatible software, plus complete an annual final declaration. Limited company income doesn’t count toward MTD thresholds since corporations will have separate obligations. Partnership income also remains outside the current MTD scope.

Voluntary Opt-In Before You’re Required

If you’re below MTD for Income Tax thresholds, you can still stick with the existing self-assessment route. You can choose to join Making Tax Digital for Income Tax before it becomes mandatory. This option is helpful for those who are close to meeting thresholds or want to get used to digital systems early.

Early adoption offers familiarity with the software before penalties start, identification of system issues when help is available, and a competitive advantage from improved cash flow transparency. You can exit voluntary participation more easily than mandatory compliance. As the MTD mandate applies, you must have been below the threshold for at least three consecutive years to deregister.

Tip: Consider MTD for Income Tax voluntary participation if your income fluctuates around thresholds, you’re planning business expansion, or you prefer gradual implementation over rushed compliance.

Examples of Who’ll Be Affected by MTD for Income Tax

Dr. Sarah operates a private medical practice with an anticipated turnover of £120,000 for the tax year 2024/25. Starting in April 2026, all her income will be subject to Making Tax Digital (MTD) regulations. Despite her significant expenses on medical equipment, professional indemnity insurance, and continuing education, her net profit amounts to £75,000. However, her gross turnover is more than £50,000. This means Sarah needs to set up a computer-based record-keeping system. This system should handle patient invoicing, track equipment depreciation, manage professional development expenses, and perform other necessary tasks.

Robert owns three rental properties, generating him £52,000 total income, just in reach of the £50,000 limit. His situation shows how small property portfolios have the ability to trigger MTD requirements. Robert will need to record rental income per property separately, record maintenance costs per unit, and treat void periods appropriately. His situation shows how landlords on threshold figures must prepare for MTD compliance even where profit margins after mortgage and operational costs are relatively thin.

Lisa is a sole trader marketing consultant with varying annual incomes of £40,000-£65,000 depending on client projects. When her income is over £50,000, she will need to join MTD from April 2026. But once pushed into MTD, she will remain there even during leaner years under £50,000 until her revenues fall consistently below the threshold for three consecutive years. Lisa’s situation describes why variable income professionals should consider voluntary opt-in – this will allow her to have systematic digital systems in place and avoid the compliance trap of being locked into MTD during lean years.

Key takeaway

Use accurate gross figures to assess MTD for Income Tax eligibility across self-employment and property. Consider potential adjustments for business growth or property acquisitions that could alter your timing. Begin exploring compatible software packages and computerised recording processes today.

The systems you implement will serve you well when commitments begin, while early implementation provides a competitive advantage through improved financial management.

Tags

#Landlord#Making Tax Digital#Property Management