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No. If your qualifying income is £20,000 or less and you are not already using it, you are automatically exempt, including after the lowest threshold arrives on 6 April 2028. HMRC tests income before expenses, not profit.
Making Tax Digital for Income Tax (MTD) means digital records and quarterly updates to HMRC. Plenty of part-time tradespeople and one-property landlords sit near the £20,000 line and wonder whether it reaches them. The rules below follow GOV.UK and the Income Tax (Digital Obligations) Regulations 2026, as checked on 16 October 2026.
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The thresholds
| Tax year HMRC looks at | You need MTD if qualifying income was over | From |
|---|---|---|
| 2024-25 | £50,000 | 6 April 2026 |
| 2025-26 | £30,000 | 6 April 2027 |
| 2026-27 | £20,000 | 6 April 2028 |
| 2027-28 and later years | £20,000 | 6 April two years after the start of that tax year |
The regulations set £20,000 for 2026-27 and every later tax year. They do not set any lower figure, so £20,000 is the line to watch. GOV.UK lists qualifying income of £20,000 or less as a permanent automatic exemption, unless your circumstances change. You do not need to apply or contact HMRC.
The test that catches people out
Qualifying income is your self-employment and property income added together before expenses. GOV.UK calls it "the amount before expenses (also known as turnover)". It is easy to look at a modest profit and assume you are under.
An electrician with low profit. Turnover in 2025-26 is £31,000. Van, tools and materials cost £13,500, so profit is £17,500. Qualifying income is £31,000, which is over £30,000, so MTD starts on 6 April 2027.
A part-time joiner who also rents out a flat. Rent of £14,400 plus £7,000 of sole-trade turnover makes £21,400. If those are the 2026-27 figures, that is over £20,000 and MTD starts on 6 April 2028.
A new trader. Someone who starts trading on 6 October 2026 and takes £12,000 by 5 April 2027 has traded for 6 months. GOV.UK says HMRC annualises a short first year for sole traders, which here means doubling it to £24,000. That is over £20,000, so MTD starts on 6 April 2028. Landlords with a short first year have to scale up their rent themselves.
A landlord with a full-time job. A £40,000 salary and £12,000 of rent gives qualifying income of £12,000, because wages do not count. That is under £20,000.
Two more points. If you own a property jointly, only your share of the rent counts. And if you are VAT registered on the cash basis and include VAT in your business income, that VAT counts too.
What this means for you
If your self-employment and property income before expenses is £20,000 or less, you do not need MTD. You still file a Self Assessment tax return each year, as before. HMRC reviews your return each year and writes to you if you go over a threshold, but GOV.UK says it is still your responsibility to check, even without a letter.
If you are already using MTD, one year at £20,000 or less does not take you out. GOV.UK says you can opt out only after 3 tax years in a row under the threshold, or if an amended return for the previous year takes you under it. The earliest anyone can leave on the 3-year basis is for 2029-30.
Penalties still change for you. GOV.UK says that from April 2027 the new points-based penalties apply to everyone who submits a personal Self Assessment return, not only people using MTD.
You can choose to join early. GOV.UK says you can sign up before you need to, for the current or next tax year. While volunteering you get no penalties for missed quarterly updates, but you agree to the new late filing and late payment penalties at sign-up, with a 2-point threshold for late returns, and you cannot go back to the old ones. If you volunteer and later want to stop, you can opt out in your HMRC online account.
Steps to check where you stand
- Add up your self-employment turnover and property income before expenses for the year HMRC will test. Use your share only for joint property.
- Leave out wages, dividends, pensions and any partnership share.
- If you started trading or letting part-way through the year, scale your income up to a full year.
- Compare the total with the table above. The free MTD check does the sums with you.
- Check again each year, because a later year over £20,000 brings you in two years later.
There are guides for each trade in the trades section, and guides on rent and joint ownership in the landlord section.
Hold your place on the waitlist
We’ll email you when Trades Tax opens, with the founding offer while places last. No payment is taken.
Questions people ask
Is £20,000 my profit or my takings?
Your takings. Qualifying income is self-employment and property income before expenses, which HMRC also calls turnover. A trader with £17,500 profit can still have qualifying income well over £20,000.
Do I need to apply for the under-£20,000 exemption?
No. GOV.UK lists qualifying income of £20,000 or less as an automatic exemption, so there is nothing to apply for. You still file your Self Assessment tax return as normal.
Does my salary count towards the £20,000?
No. Pay from a job, dividends, the State Pension, private pensions and a partner's share of partnership profit are all left out. Only self-employment and property income count.
Can I join Making Tax Digital voluntarily?
GOV.UK says you can sign up before you need to use it, for the current or next tax year, and HMRC checks you are eligible from the details you give. While volunteering, you get no penalties for missed quarterly updates.
What if my income goes over £20,000 later?
Each year is tested again. If a later tax year's qualifying income is over £20,000, you need Making Tax Digital from the 6 April two years after the start of that tax year.
I already use Making Tax Digital and my income has dropped under £20,000. Can I stop?
Not after one year. GOV.UK says you can opt out once your qualifying income has been under the threshold for 3 tax years in a row, or if an amended return for the previous year takes you under it. Until then, keep sending your updates.
Sources
- Find out if you can get an exemption from Making Tax Digital for Income Tax (GOV.UK)
- Find out if and when you need to use Making Tax Digital for Income Tax (GOV.UK)
- Work out your qualifying income for Making Tax Digital for Income Tax (GOV.UK)
- Sign up for Making Tax Digital for Income Tax (GOV.UK)
- Use Making Tax Digital for Income Tax: Check if it has been added to your HMRC online account (GOV.UK)
- Use Making Tax Digital for Income Tax: If your circumstances change (GOV.UK)
- Penalties for Making Tax Digital for Income Tax volunteers (GOV.UK)
- Penalties for Making Tax Digital for Income Tax (GOV.UK)
- The Income Tax (Digital Obligations) Regulations 2026, SI 2026/336 (legislation.gov.uk)
This is general information to help you understand the rules. It isn't tailored to your circumstances, so check your own position before acting on it.
Righto Tax is a trading name of NJG Consultancy Ltd, registered in England and Wales, company number 16095900. Registered office: Jubilee House, East Beach, Lytham St Annes, FY8 5FT.
What happens next
- Use the free Making Tax Digital checker to see your own start date and deadlines.
- See what Righto Tax for Trades does for you, and join the waitlist.
- Questions about this page? Email hello@rightotax.co.uk.