MTD for Income Tax Self Assessment: What are the thresholds?

by
Keir Thomas-Bryant
January 10, 2023
Three piles of coins with letter cubes on top of each, reading T A X

MTD for Income Tax Self Assessment (MTD ITSA) is due to become mandatory for certain kinds of sole traders and landlords as of April 2026.

You might’ve read that it was due from April 2024. This changed in late 2022 when the UK government postponed the date—and made a handful of other changes, too. This blog is up-to-date with those announcements.

Whether you'll be legally required sign up when 2026 comes around will depend on whether your income from a self-employed trade or property rental crosses a certain threshold.

Read on to learn more. Here's what we talk about:

  1. What is the threshold for MTD ITSA?
  2. Does MTD ITSA affect partnerships as well as sole traders and landlords?
  3. Over what period is the threshold for MTD ITSA calculated?
  4. Is it my turnover or income that counts for the MTD ITSA threshold?
  5. Is the threshold for MTD ITSA before or after tax?
  6. What’s considered qualifying income for the MTD ITSA threshold?
  7. Do savings interest, pensions etc. contribute to the threshold for MTD ITSA?
  8. Are there separate MTD ITSA thresholds for income from self-employment and landlord rents?
  9. Does the MTD ITSA threshold apply to all rental income from a property or just the share I receive (e.g. shared property ownership)?
  10. Do I have to be registered for the existing Self Assessment scheme for MTD ITSA to apply?
  11. What happens if my income pushes me above the MTD ITSA threshold but then falls to below the threshold in later years?
  12. Does capital gains tax, inheritance tax, VAT, or other kinds of tax affect the MTD ITSA threshold?
  13. I own only one rental property that I inherited, which is to say, I’m not a professional landlord. Does MTD ITSA affect me?
  14. What’s the MTD for VAT threshold?
  15. Do I have to be registered for MTD VAT in order to register for MTD ITSA?
  16. I’m new to self-employment and/or rental income from property. I know my income will be over £50,000 (as of April 2026, or £30,000 as of April 2027). Do I have to register for MTD ITSA?
  17. Do I have to earn above the MTD ITSA threshold to register for MTD ITSA?

1. What is the threshold for MTD ITSA?

To be required to sign-up for MTD for ITSA in April 2026, HMRC says the qualifying annual income for the tax year for sole traders or landlords must be more than £50,000–which is to say, it must be from £50,001 upwards.

From April 2027, this threshold will be lowered to £30,000, so those earning £30,001 and above will need to sign-up for MTD ITSA from that date.

It’s anticipated that the threshold will be lowered further at a future date, meaning those earning less than £30,000 might be required to sign-up to MTD ITSA. But it’s not yet been announced when this will happen, or what the threshold will be at that point.

2. Does MTD ITSA affect partnerships as well as sole traders and landlords?

It was planned that MTD ITSA would become mandatory for general partnerships a year after the original launch date of April 2024, with the same basic rules applying as for sole traders.

However, this requirement was discarded by the government in late 2022.

It’s now unclear when MTD ITSA will become a legal requirement for partnerships, and what any threshold will be, but it will almost certainly not be mandated before April 2027.

Notably, partnerships can't voluntarily sign-up for MTD ITSA at the present time, either, so are effectively excluded from MTD ITSA for the time being.

3. Over what period is the threshold for MTD ITSA calculated?

All businesses have a basis period, which is the period for which tax is calculated and paid. This typically matches the accounting period of the business, but it isn't always the case.

However, inspired by the MTD ITSA introduction, the rules are changing so that all unincorporated businesses—such as sole traders—must use the tax year (6 April – 5 April) as their basis period by the time MTD ITSA is introduced. This is true even if their accounting period uses different dates.

Landlords already use the tax year as their basis period.

Therefore, the period over which the threshold for MTD ITSA will be calculated is the tax year.

For those starting MTD ITSA on the start date of April 2026, the tax year used to calculate this will be 2024/25, because income for 2025/26 will not yet have been fully declared.

4. Is it turnover or income that counts for the MTD ITSA threshold?

It’s your gross income that determines whether MTD ITSA is a legal requirement for you.

Turnover refers to all money received by a business, so could include money received for things like sales, something not counted for the sake of the MTD ITSA threshold.

5. Is the threshold for MTD ITSA before or after tax?

It’s your gross income that matters, which is to say, it’s the pre-tax income you have before deducting expenses.

6. What’s considered qualifying income for the MTD ITSA threshold?

Qualifying income for MTD ITSA is that which comes from self-employment and property income from UK sources (although foreign income from self-employment or property is included if you’re domiciled in the UK).

Note that the income you need to consider might be from multiple self-employments you undertake and/or properties that you have.

7. Do savings interest, pensions etc. contribute to the threshold for MTD ITSA?

No. If you fall within the scope of MTD ITSA (or sign-up voluntarily), then you’ll also need to use your MTD software (or HMRC online services account) to report other kinds of personal income, such as savings interest. But this won’t count as qualifying income in order to decide the threshold for whether MTD ITSA should apply.

8. Are there separate MTD ITSA thresholds for income from self-employment and landlord rents?

No. For the sake of the MTD ITSA threshold, your income from self-employment and landlord rents are combined together.

For example, if you’re a self-employed plumber with £35,000 income from that trade, and you also receive £20,000 from rental income, then the total qualifying income of £55,000 pushes you over the £50,000 threshold—and MTD ITSA must apply as of April 2026.

9. Does the MTD ITSA threshold apply to all rental income from a property or just the share I receive (e.g. shared property ownership)?

MTD ITSA is about income tax, so, therefore, applies just to your personal income.

In other words, the MTD ITSA threshold applies to just the share of the rental income you receive.

For example, if rental income from an apartment block is £70,000 per annum, and your share of that is £55,000, then that would push you above the MTD ITSA threshold of £50,000 as of April 2026, and therefore MTD ITSA will apply to you.

As mentioned earlier, any self-employed income must be added to this. In other words, if you receive £30,000 from a share of rental income, and your self-employed income is £29,000, then the total income of £59,000 means that MTD ITSA will apply to you as of April 2026.

10. Do I have to be registered for the existing Self Assessment scheme for MTD ITSA to apply?

Yes. As of the start date for MTD ITSA, if your requirement to declare self-employed or landlord income is new (e.g. you’ve just started in a trade after being employed), you will have to use the older Self Assessment system until your income rises above £50,000. Then, as of the start of the next tax year, you’ll be legally required to register for MTD ITSA.

This is only for 2026/27, however, and as of April 2027 if your income has been above £30,000 then you will need to sign-up to MTD ITSA.

11. What happens if my income pushes me above the MTD ITSA threshold but then falls to below the threshold in later years?

Once you sign-up to MTD ITSA—either voluntarily or because your income has passed the threshold—you must continue using it.

This is the case even if your income drops to £50,000 or below (or £30,000 or below as of April 2027).

The only time you would stop using MTD ITSA for self-employment or landlord rental income is if you stopped receiving income of that type, and therefore no longer needed to submit an income tax return (for example, if you returned to full-time salaried employment after being self-employed, or sold the property).

At that point, you can deregister for Self Assessment and MTD ITSA.

12. Does capital gains tax, inheritance tax, VAT, or other kinds of tax affect the MTD ITSA threshold?

No. The threshold for MTD ITSA is calculated based only on gross self-employed trade income and rental income from properties.

13. I own only one rental property that I inherited, which is to say, I’m not a professional landlord. Does MTD ITSA affect me?

If either the rental income is over £50,000 as of April 2026 (or £30,000 as of April 2027), or your rental income plus your income from self-employment is above £50,000/£30,000, then your income is above the threshold and you must register for MTD ITSA.

The nature of how the property came into your possession, or the work you do as a landlord, has no bearing on this.

14. What’s the MTD for VAT threshold?

MTD for VAT is now mandatory for all businesses that are registered for VAT, so there is no longer a threshold as there was when MTD for VAT was first launched back in 2019.

You’ll need to register for VAT—and therefore MTD for VAT—if your turnover is over £85,000.

15. Do I have to be registered for MTD VAT in order to register for MTD ITSA?

No. The two schemes are entirely independent of each other, even if their requirements are similar.

16. I’m new to self-employment and/or rental income from property. I know my income will be over £50,000 (as of April 2026, or £30,000 as of April 2027). Do I have to register for MTD ITSA?

You will first need to register for Self Assessment. Once you have submitted a tax return that includes self-employed and/or rental income in excess of the £50,000/£30,000 threshold, then you will need to register for MTD ITSA.

17. Do I have to earn above the MTD ITSA threshold to register for MTD ITSA?

No, you can sign-up voluntarily for MTD ITSA regardless of what your income is, or where it comes from (although there are certain other limitations). If you anticipate your income rising above £50,000 (as of April 2026), or £30,000 (as of April 2027), then signing up ahead of time makes a lot of sense because you get a chance to sort out any issues with your processes ahead of MTD ITSA becoming a legal requirement, at which point penalties might apply if you get something wrong.

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