Newly Self-Employed: When Does Making Tax Digital Start for You?

The Short Answer: Not in Your First Year

Making Tax Digital for Income Tax is decided from a tax return, not from what you are earning today. GOV.UK says "HMRC will assess your qualifying income for a tax year by checking the Self Assessment tax return that you submitted in the previous tax year."

It also sets two conditions for signing up at all. You must "be registered for Self Assessment" and "have submitted a tax return in the last 2 years". If you have never sent a tax return, you cannot sign up even if you wanted to. If you already send one for another reason, such as being a company director, it does not show your new business, so it does not bring you in.

So the order is fixed. You register for Self Assessment if you are not registered already, you send the first tax return that includes the business in the normal way, HMRC looks at the self-employment income on it, and if that is over the threshold you start Making Tax Digital from a later 6 April.

Which Tax Return Decides

GOV.UK gives three stages, each tied to one tax year's return. If your qualifying income is over "£50,000 for the 2024 to 2025 tax year", you should have started on 6 April 2026. Over "£30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027". Over "£20,000 for the 2026 to 2027 tax year, you will need to use it from 6 April 2028".

For a new sole trader, the return that matters is the one for the tax year you started in. A tax year runs from 6 April to 5 April.

• Started between 6 April 2025 and 5 April 2026: your first return is for 2025 to 2026, due by 31 January 2027. Over £30,000 and you start on 6 April 2027.

• Started between 6 April 2026 and 5 April 2027: your first return is for 2026 to 2027, due by 31 January 2028. Over £20,000 and you start on 6 April 2028.

GOV.UK's stages stop at April 2028. For later years it says only that "HMRC will review your Self Assessment tax return and check your qualifying income each tax year", and that if you are over the relevant threshold it will write "confirming that you need to start using Making Tax Digital for Income Tax by the start of the following tax year".

Do not wait for the letter. GOV.UK says "If you did not receive a letter, it is still your responsibility to check if and when you need to use Making Tax Digital for Income Tax".

A Part Year Is Scaled Up to a Full Year

Most people do not start on 6 April, so their first return covers only part of a tax year. HMRC does not compare that part year with the threshold as it stands. GOV.UK says "If you are a sole trader, we'll annualise your qualifying income if we have the information. This means we'll work out what your qualifying income would be over a full tax year."

Its 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."

Take a joiner who starts on 6 October 2026 and takes £14,000 by 5 April 2027. That is six months. Doubled, it is £28,000, which is over the £20,000 threshold for the 2026 to 2027 tax year, so Making Tax Digital starts for them on 6 April 2028, even though the return itself shows £14,000.

The words "if we have the information" matter. HMRC can only scale up if it knows your start date, which you give when you register and on the return. Work the full-year figure out yourself so the letter is not a surprise.

Landlords are treated differently. GOV.UK says "If you receive income from property, you need to annualise your income yourself to work out your qualifying income."

What Counts: Turnover, Not Profit, and Not Your Wages

Qualifying income is "your total income from self-employment and property. This is the amount before expenses (also known as turnover)". A business that takes £35,000 and spends £20,000 has qualifying income of £35,000, not £15,000.

Self-employment and property are added together. GOV.UK's example is £25,000 of rent and £27,000 from self-employment, making £52,000.

Nothing else counts. GOV.UK lists employment (PAYE), your share of the profit as a partner in a business, dividends "including those from your own company", a State Pension and private pensions as income that does not count.

That decides it for many people who start a business beside a job. Someone on a £40,000 salary whose new business takes £12,000 in a full year has qualifying income of £12,000 and is under every threshold announced so far.

If you are VAT registered and use the cash basis, GOV.UK says "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."

The MTD checker adds up the figures you type and tells you which stage you fall into. It does not scale up a part year, so enter the full-year figure.

If You Are Already in Making Tax Digital and Start a New Business

This is a different case. A landlord who already sends quarterly updates and then starts trading, or a sole trader who starts a second trade, has a new income source inside a service they already use.

GOV.UK says "you only need to start creating digital records and sending quarterly updates for the new income source after you have included it in a tax return." Its example is a source that starts on 1 July 2026: it goes on the 2026 to 2027 tax return, due by 31 January 2028, and quarterly updates for it start "from 6 April 2028".

You may bring it in sooner. GOV.UK says "If you prefer, you can choose to report the new income in Making Tax Digital for Income Tax from when the income starts", by selecting that option in your HMRC online services account.

Either way you add the new source in your HMRC online services account before the tax return that first includes it. A landlord who lets another UK property has not started a new source: GOV.UK says the property "will form part of your existing property business".

Can You Join Early?

If you have never sent a tax return, not before your first one is in, because of the condition that you "have submitted a tax return in the last 2 years". If you already send tax returns for another reason, you meet both conditions and can sign up now.

GOV.UK says "You can sign up for Making Tax Digital for Income Tax before you need to use it to help you get ready. You can sign up for the current tax year or the next one."

Read the penalty rules first. GOV.UK tells volunteers "HMRC will contact you to confirm when you've become liable for these penalties after you've signed up." The guide to signing up with HMRC before you connect software covers the steps.

What to Do Now

Register for Self Assessment. GOV.UK sets the date by the tax year: the current wording is that you must tell HMRC "by 5 October 2026 if you need to complete a tax return for the previous tax year" and you have "not sent a tax return before". Start in the 2026 to 2027 tax year and the same date falls on 5 October 2027. It adds that if you tell HMRC later "you could get a penalty". If your date has already passed, register now anyway.

Send the first tax return that includes the business by 31 January after the tax year ends. It is an ordinary Self Assessment return, sent through HMRC's online service or commercial software. FileThat files through Making Tax Digital, so it cannot send a return for someone who is not signed up to it yet.

Keep records from your first day. You need them for that first return whatever happens next, and they are what tells you whether your full-year turnover is heading over the threshold. FileThat's Income and Expenditure ledger is free to use for this. The guide to allowable expenses for sole traders sets out what you can claim.

When your first return shows you are over the threshold, the steps are the usual ones: sign up with HMRC, connect your software, and send a quarterly update every three months from the 6 April you start.