Making Tax Digital threshold: who's in, and when (£50k, £30k, £20k)

The Making Tax Digital threshold is the amount of qualifying income (your self-employment and property turnover, before expenses) above which you must keep digital records and send HMRC quarterly updates. It comes down in three steps:

If your qualifying income is £20,000 or less, you are exempt. It is aimed at sole traders and landlords registered for Self Assessment; partnerships are not in it yet, and limited companies are outside it. The rest of this guide covers what counts towards the figure, which year HMRC looks at, and what actually changes on day one.

What counts as qualifying income

Qualifying income is your total income from self-employment and property, before expenses. It is turnover, not profit. A joiner who invoices £42,000 and spends £20,000 on materials and a van has qualifying income of £42,000, not £22,000, so they are over the £30,000 line even though they made £22,000.

The sources add together. HMRC's own example is £25,000 of rent plus £27,000 of self-employment income: £52,000 of qualifying income, even though neither on its own is over £50,000.

What does not count:

• a salary or wages taxed through PAYE
• your share of profit from a partnership, as a partner
• dividends, including from your own company
• the State Pension and private pensions

So a full-time employee earning £45,000 with a £12,000 weekend business has qualifying income of £12,000, and is exempt. The salary is invisible to the test.

A few details that catch people out:

• Jointly owned property: only your share of the income counts. Half of a £50,000 let is £25,000.
• New sole traders: if you have only traded for part of the year, HMRC annualises the figure. Six months of trading is doubled.
• VAT on the cash basis: if you include VAT in your declared income, it counts towards the threshold.
• A business you closed: it still counts if you have another self-employment or property income source continuing. If every such source stopped before 6 April 2026, you will not need to use Making Tax Digital, but tell HMRC, or it may sign you up from what it already holds.

Which year HMRC looks at

HMRC checks the Self Assessment return you filed for the earlier tax year and writes to you if you are over. The return for 2024/25 decided April 2026, the return for 2025/26 decides April 2027, and the return for 2026/27 decides April 2028.

The letter is a courtesy, not a condition. GOV.UK is plain that if no letter arrives, it is still your responsibility to check and sign up. HMRC has a checker tool that asks about your income for the three years above.

Once you are in, you stay in. You can choose to opt out only if your qualifying income falls below the relevant threshold for three tax years in a row.

Does Making Tax Digital apply to me?

Making Tax Digital for VAT is separate and already applies: every VAT-registered business should be signed up and filing VAT returns through compatible software.

Exemptions

Some exemptions are automatic, so you do not need to apply. The main ones are qualifying income of £20,000 or less, not having a National Insurance number before the tax year starts, and acting as a personal representative of someone who has died. Others last until April 2027 at the earliest, for example if your 2024/25 return claimed averaging relief or qualifying care relief, or included the SA109 residence page.

You can apply for an exemption if you are digitally excluded: if your age, a health condition or disability stops you using a computer, tablet or smartphone, if your religious beliefs are incompatible with digital records, or if you cannot get internet access where you live or work. HMRC will not accept an application just because you used to file on paper, do not know accounting software, have only a few records or would find it costly.

Exempt people still file a Self Assessment return as before. Nothing gets out of that.

What changes once you are in

Three things change. The tax rules do not: you claim the same allowable expenses as before.

1. Digital records. You keep a record of each item of self-employment and property income and expense in software that works with Making Tax Digital, showing the amount, the date and the category. The categories are the same ones Self Assessment uses. You still keep the receipts and invoices behind them as well, as you do now.

2. Quarterly updates. Every three months your software adds your records up and sends HMRC totals for each category. HMRC does not receive your individual receipts, and an update is not a tax return. Each update covers the tax year so far. If nothing happened that quarter, you still send one.

If your accounts run to 31 March, you can choose calendar periods ending 30 June, 30 September, 31 December and 31 March. The deadlines are the same, but you must pick before you send your first update.

3. A tax return through software. You still submit a return by 31 January after the tax year, but through your compatible software, with any other income such as a salary or savings added.

Penalties

Late quarterly updates and returns earn points rather than instant fines. Reach 4 points and you get a £200 penalty, then another £200 for each deadline missed after that. You can only get one point per deadline, even with more than one business.

There is some breathing space at the start. No points apply to late quarterly updates for 2026/27. At Budget 2026 on 28 October 2026, the government said people joining in April 2027 will not get points for late submission of their first four quarterly updates for 2027/28 either. The Budget also said it is deferring the rollout to "several taxpayer groups until further notice"; check the GOV.UK pages for who that covers as HMRC updates them.

Late payment works differently: a penalty starts when tax is still unpaid 15 days after the due date (30 days in your first year), and grows the longer it goes on. A payment plan agreed with HMRC pauses it.

Choosing software

HMRC recognises two kinds of software: products that create the records themselves (by bank feed, receipt scanning or typing), and bridging software that connects to records you keep elsewhere, such as a spreadsheet. You can use more than one product, but they must be digitally linked. HMRC lists CSV import and export, linked spreadsheet cells and API transfers as acceptable links. Retyping or copying and pasting a record after it has been sent in an update is not allowed.

HMRC's software finder lists recognised products, and HMRC does not recommend any of them. Free options exist for simple tax affairs, usually with limits.

If you only claim flat-rate simplified expenses, you do not need digital records of your actual costs for those items. If you are unsure which you will use, record everything.

Frequently asked questions

What is the Making Tax Digital threshold for 2027?

Over £30,000 of qualifying income, judged on your 2025/26 tax return. If you are over it, you must use Making Tax Digital for Income Tax from 6 April 2027.

Is the threshold based on turnover or profit?

Turnover. Qualifying income is your self-employment and property income before expenses.

Does Making Tax Digital apply to limited companies?

No. Making Tax Digital for Income Tax is for sole traders and landlords. A director's salary and dividends do not count, though a VAT-registered company already uses Making Tax Digital for VAT.

Does Making Tax Digital apply to CIS subcontractors?

Yes, if you are a self-employed sole trader and your qualifying income is over the threshold. CIS deductions are claimed back through the tax return as before; our CIS tax rebate guide covers that part.

Do I still need receipts with Making Tax Digital?

Yes. You keep digital records of each income and expense, and you still keep the original records, such as invoices and receipts, or copies of them. Our guide on how long to keep receipts has the time limits.

What if I am under £20,000?

You are automatically exempt and carry on with a normal Self Assessment return. HMRC checks your figure each year, so a good year can bring you in later.

Where ClaimSnappy fits

ClaimSnappy is not Making Tax Digital software. It does not send quarterly updates or tax returns to HMRC. It looks after the part that usually goes missing before the software ever sees it: the receipts and the miles.

On a self-employed desk you snap or upload each receipt and it is read for the shop, date, total, VAT and a suggested category, which you check. Trips are logged with a reason and priced at HMRC's mileage rates. Reports adds up your spend for the tax year (6 April to 5 April), with a CSV download and a Self Assessment working sheet that lays your allowable expenses out under the SA103S boxes. It is a working sheet, not a return. If your accountant handles the filing, they can join free in the accountant portal and export your records as import files for Xero, QuickBooks Online or Sage 50.

There is a 30-day trial with no card needed, then Solo is £5 a month. See how it works if you claim for yourself, or compare plans. For the mileage side, our HMRC mileage log guide shows what each trip record needs.

ClaimSnappy keeps the records; it does not decide whether you are in Making Tax Digital or what HMRC will allow. If your figure is close to a threshold, HMRC's checker or an accountant will settle it faster than guessing.