Is the MTD threshold gross income or profit?

Quick answer: It's gross income — your turnover, before expenses — not profit. So you can be in scope for Making Tax Digital even if your actual profit is well under £50,000. This single point catches a lot of people out. Test your real turnover figure with the MTD Scope Checker.

If you take one thing away from this article, make it this: the Making Tax Digital for Income Tax (MTD ITSA) thresholds are measured against your turnover, not your profit. People who deduct their expenses first and check that figure against £50,000 get the wrong answer — sometimes badly wrong. Here's why, with the numbers worked through.

Gross income means turnover, before expenses

HMRC decides whether you're mandated for MTD using your qualifying income. Qualifying income is your gross income before expenses from self-employment and property, added together. "Gross" and "before expenses" are the operative words.

• Turnover (gross income): everything your business invoices or takes in — your sales, fees and rental receipts. This is what's tested.
• Profit: what's left after you subtract your allowable business expenses. This is not what's tested.

So the order matters. You do not take your turnover, knock off your costs, and then compare the result to the threshold. You compare your turnover itself to the threshold.

Qualifying income also excludes employment salary (PAYE), dividends, savings interest and pensions — it's purely self-employment and property turnover. For the complete definition, see our qualifying income guide.

The thresholds, for reference

£20,000 or under is not yet mandated. And the test is strictly "over" — exactly £50,000 is not over £50,000, so it falls into the 2027 band.

Worked example: Sarah, the courier with high running costs

Sarah is a self-employed delivery courier. Her business has plenty of running costs — fuel, vehicle leasing, insurance, maintenance. Her most recent Self Assessment return shows:

• Turnover: £58,000
• Expenses: £15,000
• Profit: £43,000

Sarah looks at her £43,000 profit, sees it's under £50,000, and assumes she's safe until 2027. She's wrong.

• The threshold is tested on gross income before expenses.
• Her turnover is £58,000.
• £58,000 is over £50,000.
• Sarah is in scope from 6 April 2026.

Her £15,000 of expenses are irrelevant to the MTD test. Even though her take-home profit is comfortably below the threshold, her turnover puts her squarely in the first wave. If she'd relied on her profit figure, she'd have missed her mandation date by a full year.

Why this catches people out

Two habits of mind lead people astray:

1. We think in profit. When someone asks "how much do you make?", most self-employed people answer with profit — the money that's actually theirs after costs. It's the number that feels like your income, so it's the number you instinctively check. But MTD doesn't use it.

2. High-cost businesses are most exposed. The bigger your expenses relative to your sales, the wider the gap between turnover and profit — and the more likely you are to be over the threshold on turnover while feeling like a "smaller" business on profit. Couriers, tradespeople buying materials, retailers with stock, and anyone leasing equipment or vehicles are classic cases. They can turn over well above £50,000 while keeping a modest profit.

It also works the other way for reassurance: a low-cost service business (a consultant, say) will have turnover and profit close together, so the two figures give a similar answer. But you should still test the turnover figure to be sure.

Turnover, not profit — and the lookback

There's a practical upside to the rule being based on a clean, gross figure: it's easy to find. HMRC uses your most recent Self Assessment return as a lookback to decide whether you're mandated, and your turnover is reported right there. You don't need to estimate or forecast — read your turnover line off your latest return and compare it to the threshold.

Remember to add together self-employment and property turnover if you have both. Each is measured gross, then combined, then tested.

What being in scope actually means

If your turnover puts you over the line, here's what changes once you're mandated:

• Digital record-keeping of income and expenses,
• Four quarterly updates (deadlines 7 August, 7 November, 7 February, 7 May), and
• A final declaration by 31 January after the tax year — so for 2026/27, that's 31 January 2028.

That's five submissions a year instead of one. For the first wave, 2026/27 is a soft-landing year, so there are no late-submission penalty points on the quarterly updates for the £50,000 cohort — though the final declaration is still penalisable.

What to do next

1. Find your turnover — the gross figure, before expenses — on your latest Self Assessment return.
2. Add property turnover if you have it.
3. Compare that figure, not your profit, to £50,000 / £30,000 / £20,000.
4. Confirm with the MTD Scope Checker — it tests your gross turnover automatically, so you don't accidentally check the profit figure and get a false sense of security.

If you're employed as well, note that your salary is excluded entirely — see Making Tax Digital when you're employed and self-employed. And for the wider picture, Am I in scope for MTD as a sole trader? runs through all three thresholds.

Whatever your situation, the safest move is to test the right number. The MTD Scope Checker does it in under a minute.

Frequently asked questions

Is the MTD threshold based on turnover or profit? Turnover — your gross income before expenses. Profit (turnover minus costs) is not used for the threshold test, so you can be in scope even with high expenses and modest profit.

I have £58,000 turnover but only £43,000 profit — am I in scope? Yes, from 6 April 2026. The £58,000 turnover is over £50,000, and expenses don't reduce the figure that's tested. Your profit is irrelevant to the MTD test.

Why does HMRC use turnover instead of profit? The threshold is designed around gross income, which is a simple, consistent figure that appears directly on your Self Assessment return — making the lookback straightforward to apply.

Where do I find the right figure to test? On your most recent Self Assessment return, which HMRC uses as a lookback. Use the turnover (gross income) line, and add together self-employment and property if you have both.

Does my salary or dividend income get added to my turnover for this? No. Qualifying income excludes PAYE salary, dividends, savings interest and pensions. Only self-employment and property turnover are counted.

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Guidance only, not tax advice. Based on HMRC rules as at June 2026.

Related guides: Am I in scope for MTD as a sole trader? · Making Tax Digital when you're employed and self-employed · What counts as qualifying income for MTD?