The thresholds are the part of MTD that trips many people up. This guide explains them slowly, because the key figure is usually qualifying income, not profit and not the amount left in your bank account.
Current GOV.UK/HMRC position: MTD for Income Tax is being phased in. The current thresholds are over £50,000 from 6 April 2026, over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028, based on qualifying income for the relevant tax years. Rules can change, so always check the latest official GOV.UK/HMRC guidance.
For context, you may also want to read Tax Basics for UK Freelancers, Best Accounting Software for UK Freelancers and the Sole Trader Expenses Guide.
The three current thresholds
HMRC’s current phased thresholds for Making Tax Digital for Income Tax are over £50,000, over £30,000 and over £20,000. The first phase applies from 6 April 2026 where qualifying income is over £50,000 for the 2024 to 2025 tax year. The second phase applies from 6 April 2027 where qualifying income is over £30,000 for the 2025 to 2026 tax year. The third phase applies from 6 April 2028 where qualifying income is over £20,000 for the 2026 to 2027 tax year.
These dates and thresholds are important, but they should always be checked against current GOV.UK guidance because tax rules can change. Freelance Wallet UK gives general guidance, not a personalised assessment.
Qualifying income is not the same as profit
For a freelancer, qualifying income is broadly about the income that counts before expenses are deducted. That means a sole trader with high costs can still be above an MTD threshold even if their taxable profit is much lower. This is a common source of confusion because freelancers often think first about take-home profit.
Suppose you invoice clients for £52,000 in a year and have £12,000 of allowable business expenses. Your profit may be £40,000 before other tax calculations, but your gross self-employed income could still put you above the £50,000 threshold. That is why it is worth checking income carefully rather than guessing from what is left after costs.
What income might count
MTD for Income Tax is aimed at self-employment and property income. If you have freelance income and rental income, you may need to consider them together. Employment income taxed through PAYE is different and does not usually work in the same way for MTD thresholds, but your overall Self Assessment position can still matter.
If your situation is simple, checking your Self Assessment records may be enough to understand the likely position. If you have several trades, property income, overseas income, partnership income or a mix of employment and freelance work, use official guidance and consider professional help.
Why thresholds matter for planning
The threshold does not only tell you when a rule applies. It also tells you when to prepare. If your income is close to £30,000 or £50,000, you may want to improve your record keeping now. Waiting until a deadline appears can make software setup, bank reconciliation and expense records feel much more stressful.
A sensible routine is to check your income each quarter, keep invoices in order, capture expenses as they happen and review whether your current accounting method can cope with MTD. If your income is well below the current thresholds, it is still useful to build habits early because clean records make Self Assessment easier too.
FAQs
Is the threshold based on profit?
Generally, no. Think in terms of qualifying income before expenses, then check HMRC guidance for your exact position.
Do side-hustle earnings count?
Self-employed side-hustle income may count if you are in Self Assessment and meet the relevant conditions.
What happens if I am under £20,000?
Based on current thresholds, you may not be required to use MTD for Income Tax yet, but you should continue to follow Self Assessment rules where they apply.
How to check your threshold position
Begin with your Self Assessment records for the relevant tax year. Look for the income from your freelance work before deducting expenses. If you also have property income, check whether it needs to be included. Then compare the total with the current phased thresholds. Do this separately from your normal profit review so you do not accidentally use the wrong number.
If your records are not tidy enough to answer the question, that is useful information in itself. MTD preparation starts with being able to find the right figures quickly. Going forward, keep invoices, payment records and expense evidence in a consistent place so your qualifying income is easier to check each year.
What if you are just below a threshold?
If you are close to a threshold, prepare as if MTD may become relevant. Your income could rise, HMRC guidance could change, or a new client could push your figures over the line. Preparing early does not commit you to unnecessary software spending, but it does mean your invoices, bank records and expenses will be easier to manage.
More Making Tax Digital guides
- Making Tax Digital: What UK Freelancers Need to Know
- When Does Making Tax Digital Start for Sole Traders?
- Best Making Tax Digital Software for Freelancers
- Do Side Hustles Need Making Tax Digital?
- Making Tax Digital Checklist for Freelancers
- Making Tax Digital vs Self Assessment
- Making Tax Digital Penalties: What Freelancers Should Know
Related freelancer money guides
- Tax Basics for UK Freelancers
- Best Accounting Software for UK Freelancers
- Sole Trader Expenses Guide
- Existing Making Tax Digital guide
Disclaimer: Freelance Wallet UK provides general information only. It is not financial, tax or legal advice. Always check official HMRC/GOV.UK guidance or speak to a qualified professional for your own situation.