Money Matters

Making Tax Digital thresholds: VAT and Income Tax

Understand the current Making Tax Digital thresholds for VAT and Income Tax, including who needs to comply, when each phase starts, and what digital reporting means for sole traders, landlords, and VAT-registered businesses.

Published 30 July, 20266 min read Share

Making Tax Digital (MTD) is HMRC’s programme for moving tax record-keeping and reporting into compatible digital software.  

The thresholds matter because they decide when a business, sole trader, or landlord must follow MTD rules for VAT or Income Tax. 

Key takeaways 

• Making Tax Digital (MTD) rules already apply to VAT-registered businesses for VAT returns. 

• MTD for Income Tax is being introduced in phases for sole traders and landlords based on qualifying income. 

• The Income Tax thresholds are £50,000 from 6 April 2026, £30,000 from 6 April 2027, and £20,000 from 6 April 2028. 

• If you are in scope for MTD for Income Tax, you need to keep digital records and use compatible software to send updates to HMRC. 

• MTD for Corporation Tax is not proceeding, so the current MTD rollout covers VAT and Income Tax. 

This article explains the current MTD thresholds, the rollout dates, who is affected, and what you may need to do next. 

Here’s what we cover:

What are Making Tax Digital thresholds? 

Making Tax Digital thresholds are the income or registration limits that decide when you need to follow MTD rules. For VAT, the key point is simple:  

• If your business is VAT registered, you must keep digital records and submit VAT Returns using compatible software.  

For Income Tax, thresholds are based on qualifying income from self-employment, property, or both. 

MTD area	Threshold limits	Start date	Who is affected
VAT	All VAT-registered businesses	From April 2019, with all VAT-registered businesses in scope from April 2022	VAT-registered businesses
Income Tax	£50,000+ from 2026; £30,000+ from 2027; £20,000+ from 2028	6 April 2026; 6 April 2027; 6 April 2028	Sole traders and landlords with qualifying self-employment or property income
Corporation Tax	Not proceeding	—	—

Who does Making Tax Digital apply to?

Making Tax Digital for VAT

All VAT-registered businesses must follow MTD rules for VAT.  

This means keeping digital VAT records and using compatible software to submit VAT Returns to HMRC. 

Making Tax Digital for Income Tax

MTD for Income Tax applies to sole traders and landlords who are registered for Self Assessment, receive income from self-employment or property, and have qualifying income above the relevant threshold for the tax year.  

The first phase started on 6 April 2026 for those above the £50,000 threshold. Further phases begin on 6 April 2027 and 6 April 2028. 

Making Tax Digital for Corporation Tax

MTD for Corporation Tax is no longer proceeding. 

This means VAT and Income Tax are the taxes included in the current MTD rollout. 

What are the MTD for VAT thresholds and requirements? 

If you are VAT registered, you need to follow MTD rules for VAT. Under MTD for VAT, businesses must keep VAT records digitally and use functional compatible software to submit VAT Returns to HMRC. 

If you already pay by Direct Debit, avoid signing up too close to the date your VAT Return is due.  

HMRC advises Direct Debit payers not to sign up less than seven days before the return is due or five days after it is due, to reduce the risk of duplicate payments.

What are the MTD for Income Tax thresholds by year? 

MTD for Income Tax is being introduced in phases. 

Your start date depends on your qualifying income, which covers income from self-employment, property, or both.  

The threshold is assessed against the relevant tax year, so it is important to check the latest HMRC guidance or speak to your tax adviser if you are unsure whether you are in scope. 

Start date	Income threshold	Relevant income test	Who this affects
6 April 2026	Over £50,000	Qualifying income for 2024 to 2025	Sole traders and landlords above the first threshold
6 April 2027	Over £30,000	Qualifying income for 2025 to 2026	Sole traders and landlords above the second threshold
6 April 2028	Over £20,000	Qualifying income for 2026 to 2027	Sole traders and landlords above the third threshold

What do you need to do under MTD for Income Tax? 

If you are in scope for MTD for Income Tax, you need to keep digital records of your business income and expenses and send updates to HMRC using MTD-compatible software. 

• Keep digital records for your business income and expenses. 

• Send quarterly updates to HMRC using functional compatible software. 

• Submit a year-end finalisation after the tax year, including any business-specific and personal tax adjustments that are needed. 

• Check whether your current accounting process, spreadsheet setup, or software can support MTD requirements before your start date. 

The year-end finalisation has two parts.  

First, you submit a Business Source Adjustable Summary to add any year-end business details, such as capital allowances, and confirm the information is complete and accurate for that business.  

Second, you submit any taxpayer-level adjustments, such as personal claims or allowances, and confirm the information is complete and accurate for you as an individual.

Who can apply for a Making Tax Digital exemption? 

HMRC considers MTD exemptions on a case-by-case basis.  

You may be able to apply if it is not reasonable or practical for you to use digital tools to keep records or submit returns.  

Examples may include: 

• disability,  

• location,  

• religious reasons,  

• or another practical barrier to using computers, software, or the internet. 

If you are exempt, you still need to meet your tax reporting obligations in the way HMRC requires.  

You should check the relevant HMRC guidance before assuming an exemption applies. 

Final thoughts 

Understanding MTD thresholds helps you plan ahead, choose the right software, and avoid last-minute compliance pressure.  

If your VAT registration or qualifying income puts you in scope, the most useful next step is to check your current record-keeping process and confirm when you need to start using compatible software. 

If you’re a sole trader, learn more about self-assessment ending and Making Tax Digital. Landlords can find out what they need to know about self-assessment and Making Tax Digital for Income Tax. You may also want to understand switching from self-assessment to MTD for Income Tax and be aware of potential HMRC penalties under Making Tax Digital. 

Editor’s note: This article was first published in November 2021 and has been updated for relevance, GEO structure, and source clarity. 

Frequently asked questions on MTD thresholds 

Editor’s note: This article was first published in November 2021 and has been updated for relevance.

Browse more topics from this article

• Making Tax Digital for businesses
• Need to know
• Tax
• VAT