Work out your qualifying income for Making Tax Digital for Income Tax

WorkingWhat out your qualifying income is

Your qualifying income is the total income you get in a tax year from self-employment and property. Your total income may come from more than one source of self-employment or property income.

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HMRC will assess your gross income (also called your turnover) before you deduct expenses. You should also check your qualifying income yourself.  

To assess your qualifying income for a tax year, we’ll look at the Self Assessment tax return that you submitted in the previous tax year.   

For example, your gross income (income before you deduct expenses) could be:be: 

• £25,000 from rental incomeincome 
• £27,000 from self-employment incomeincome 

In this example, your total qualifying income would be £52,000.£52,000. 

How

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If your accounting period is longer or shorter than 12 months

If weyou haveare thea data,sole trader, we’ll annualise your qualifying income.

income if we have the information. For example, if you have become a sole trader but you’ve only been trading for 6 months in your first tax year, we’ll double your income to find out your qualifying income.

If you receive income from property, you need to annualise your income yourself to work out your qualifying income.

What’s included in your qualifying income

If you get income from a jointly owned property

Your share of the property income will count towards your qualifying income. For example, you:

• jointly own a property with your sibling which generates £50,000 in income
• both receive an equal share
• do not have any income from self-employment

In this example, your qualifying income would be £25,000.

If you jointly own a property and only receive notice of your share of the income after expenses have been deducted, then we’ll assess that figure for your qualifying income.

If you use the cash basis and are VAT registered

You can choose to include or exclude VAT when you declare your business income. If you include it, then it will count towards your qualifying income.

If you’re a beneficiary of a bare trust

Any property or trading income that you’re entitled to will count towards your qualifying income.

If you’re a beneficiary of an interest in possession trust

Any property or trading income that is paid directly to you and bypasses the trustees will count towards your qualifying income.

If the transactions in UK land rules apply

If your income is treated as profits of a trade under the transactions in UK land rules, it will count towards your qualifying income where it is a continuing income source over more than one tax year.

If you receive disguised investment management fees or income based carried interest

These forms of remunerationpayment are treated as the profits of a deemedspecific trade and will formcount parttowards of your qualifying income.

If you use averaging relief 

Averaging relief does not affect your gross income, for example if you’re a farmer or creative artist.

What’s not included in your qualifying income

If you have additional sources of self-employment or property income alongside these sources, you could still be required to use Making Tax Digital for Income Tax.

If you get income from a partnership

Income from a partnership does not count towards your qualifying income, unlesshowever you receive disguised investment management fees or income based carried interest.interest do count towards your qualifying income.

If you’re impacted by basis period reform

You may have transition profits from previous tax years that will be assessed in the tax year 2024 to 2025 and the next 4 tax years. These profits will not count towards your qualifying income.

If you’re a carer that is eligible for qualifying care relief

You may receive qualifying care relief if you are a carer (such as a foster carer or a kinship carer) who looks after children or adults. 

The qualifying care receiptsrelief that you receive will not count towards your qualifying income. 

If you’re not sure if you receive qualifying care relief, you can contact your local authority to check.

One off transactions in UK land 

If your income is treated as profits of a trade under the transactions in UK land rules, it will not count towards your qualifying income if it: 

• only falls within one tax year 

• is not a continuing source  

You should have recorded when the income source ceased on your tax return. 

If you get income from UK Real Estate Investment Trusts (UK REITs) or a Property Authorised Investment Funds (PAIFs)  

Income from REITs or PAIFs will not count towards your qualifying income.

How your tax residence affects your qualifying income

If you’reyou were a UK tax resident in the 2024 to 2025 tax year

YourTo check your qualifying incomeincome, we’ll look at the Self Assessment tax return you submitted in the previous tax year. This will include your:

• self-employment income
• UK and foreign property income

For example, you could:

• be a sole trader in the UK
• rent out a property in France

In this example, both income sources will contributecount totowards your qualifying income.

If you’reyou were not a UK tax resident in the 2024 to 2025 tax year

To assess your qualifying income, we’ll look at the Self Assessment tax return you submitted in the previous tax year. Your qualifying income will include:

• UK property income
• self-employment income that you have declared in your UK Self Assessment tax return

If you have any income from a trade of dealing in or developing UK land, this will be included.

Foreign property income and self-employment income that you have not declared on your UK Self Assessment tax return will not contributecount totowards your qualifying income.

For example, you could:

• be tax resident in Spain
• rent out a property in the UK
• be a sole trader in Spain

In this example, only your UK property income would contributecount totowards your qualifying income.

If you submit information on the SA109 supplementary page for your 2024 to 2025 tax return and expect to do so for your 2026 to 2027 tax return, you will not need to use the service before April 2027.

After you work out your qualifying income

Once you’ve worked out your qualifying income, you can find out if and when you need to use Making Tax Digital for Income Tax.