MTD Threshold: Do Your Holiday Lets Cross It?

The Making Tax Digital threshold is £50,000, then £30,000, then £20,000 — and almost every holiday let host who works it out wrongly does so for the same three reasons. They use profit instead of turnover, they test one income source instead of the combination, or they test the wrong tax year.

The test itself takes about ten minutes with your booking figures in front of you. What follows is the test, in the order the regulations apply it, with the traps flagged where they sit.

This is general guidance, not tax advice. Confirm your own position with HMRC or a qualified accountant.

The Three Numbers, and Which Year Each Tests

Regulation 27 of The Income Tax (Digital Obligations) Regulations 2026 defines the "qualifying amount" for a tax year as "£50,000 for the tax year 2024-25", "£30,000 for the tax year 2025-26", and "£20,000 for the tax year 2026-27 and any subsequent tax year".

The year in the regulation is the year your income is measured, not the year the obligation starts. HMRC's eligibility guidance sets out the gap: over £50,000 for 2024-25 and "you should've started using Making Tax Digital for Income Tax from 6 April 2026"; over £30,000 for 2025-26 and "you will need to use it from 6 April 2027"; over £20,000 for 2026-27 and "you will need to use it from 6 April 2028".

Test this tax year's income	Against this amount	Obligation starts
2024-25	£50,000	6 April 2026
2025-26	£30,000	6 April 2027
2026-27	£20,000	6 April 2028

Trap 1 — testing the current year. Your 2026-27 bookings do not decide whether you are in MTD for 2026-27. Your 2024-25 return does.

Step 1: Take Gross, Not Net

HMRC's qualifying income guidance is unambiguous: "Qualifying income is your total income from self-employment and property. This is the amount before expenses (also known as turnover), based on the tax return you submitted in the previous tax year."

The statutory wording is in regulation 26: the amount of income from a relevant activity is "(i) the amount included in the return before any deductions, or (ii) if the person is not required to include in the return the amount of income from the relevant activity before any deductions, the amount included in the return after deductions." Limb (i) — gross — is the default. Limb (ii) only applies where your return does not require you to state the gross figure in the first place, which is the situation Trap 2b below covers.

For a holiday let that means the figure before you subtract:

• Platform or agency commission
• Changeover cleaning and laundry
• Mortgage interest
• Insurance premiums
• Utilities, council tax or business rates
• Repairs, replacements and maintenance
• Accountancy fees

Trap 2 — netting off platform commission. If a platform pays you £43,000 after deducting £4,500 of commission, the gross receipt is £47,500, not £43,000. Whether commission is deducted at source or invoiced separately does not change the turnover figure.

Trap 2b — jointly-owned property where only the net figure is notified. This is limb (ii) above, and it is the modal case for a co-owned cottage. HMRC's guidance is explicit: "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 your co-ownership arrangement (an agent, a managing platform, or the other owner) only tells you your net share, use that net figure — do not gross it back up.

VAT and part-year lettings have their own rules too, each attached to a defined situation rather than to everyone. If you use the cash basis and are VAT-registered, HMRC's guidance gives you a choice — the sentences appear under that exact sub-heading, "If you use the cash basis and are VAT registered", and the choice belongs to that population rather than to VAT-registered landlords generally: "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." And where your accounting period is longer or shorter than 12 months, HMRC's guidance says: "If you receive income from property, you need to annualise your income yourself to work out your qualifying income." A cottage let for its first partial season is annualised by the owner, not by HMRC.

Step 2: Add Every Relevant Activity Together

Regulation 25 defines a person's qualifying income for a tax year as "the sum, determined in accordance with regulation 26, of the amounts of income, from each relevant activity carried on by the person in that tax year, required to be included in the person's return for that tax year."

So a single figure is built from:

• All holiday let and short-term let turnover, across every property
• Any long-term residential letting turnover
• Any overseas property turnover reportable on your return
• All sole-trader self-employment turnover, whatever the trade

Trap 3 — treating the trade and the property as separate tests. They are one test. £30,000 of cottage income plus £24,000 of freelance income is £54,000, and clears the £50,000 line even though neither source does.

Step 3: Include Your Share of Jointly-Owned Property

HMRC's guidance includes your proportional share from jointly-owned property, and income from property or trades within bare trusts, in qualifying income.

Trap 4 — assuming a jointly-held let splits you both under the line. It does not follow. Each owner tests their own share against the same threshold, but each owner also adds their own other income on top. One spouse with a separate trade can be inside the regime while the other stays out, on the identical property.

Step 4: Strip Out What Does Not Count

HMRC's guidance lists what does not count towards qualifying income: "employment (PAYE), your share of profit from a partnership as an individual partner, dividends (including those from your own company), a State Pension, private pensions."

Regulation 26 separately excludes, for the tax year, "an amount received by a trustee, in that capacity", payments to visiting performers under section 13(2) of ITTOIA 2005, and "qualifying care receipts within the meaning of Chapter 2 of Part 7 of ITTOIA 2005 (qualifying care relief)".

Trap 5 — including your salary. A host earning £48,000 in employment and £18,000 from one cottage has qualifying income of £18,000, not £66,000. PAYE income is outside the test entirely.

If the properties are held in a limited company, MTD for Income Tax does not apply to that income at all — it is an income tax regime, and the company pays corporation tax.

The Worked Test

Fill this in from your return for the measuring year.

#	Line	Amount
1	Gross UK property receipts, all properties, before any expenses
2	Your share of jointly-owned property receipts — gross, unless you are only ever notified of your share after expenses (use that net figure instead, per Trap 2b)
3	Gross overseas property receipts on your return
4	Gross sole-trader self-employment turnover, all trades
5	Subtotal (1 + 2 + 3 + 4), excluding qualifying care receipts and trustee receipts (these never enter the total — see Step 4)
6	Qualifying income (= line 5)
7	Qualifying amount for that year (£50,000 / £30,000 / £20,000)
8	Line 6 greater than line 7? Yes = in scope

Do not put employment income, dividends, pensions or partnership profit shares anywhere on this sheet — they belong to none of the lines.

Once You Are In, Leaving Is Not Automatic

The test above is described as an annual check, and testing it every year is right — but the regulations are drafted as an exemption below the amount, not an obligation above it: regulation 21 exempts a digital obligation for a person "where this Chapter applies", and Chapter 2 (regulations 21–27) is where the amounts sit. That framing matters once you cross the line, because getting back out is not the mirror image of getting in.

Regulation 23 makes the below-threshold exemption conditional on "no digital obligation applied to the person in relation to the tax year Y-1" — so a single year at or under the qualifying amount does not exempt you the year after, if you were in the regime the year before that. Regulation 24 sets the actual exit route: three consecutive tax years in each of which, in the words of regulation 24(b), "the amount of the person's qualifying income for each of those three tax years was not more than the qualifying amount for that tax year" — and only for tax years after 2028-29. Note "not more than": landing exactly on the qualifying amount counts as within the exemption, not outside it, which is why the worked test above asks whether line 6 is greater than line 7.

Trap 6 — assuming a single quiet season lets you out. One booking-light year at or under the qualifying amount does not remove the obligation. It takes three years running, and the earliest that can take effect is 2029-30.

If You Are Over the Line

Being over the threshold is not the end of the question. Two things remain.

Check the exemptions. Paragraph 14 of Schedule A1 to the Taxes Management Act 1970 requires that "The Commissioners must by regulations make provision— (a) for a person to be exempt from requirements imposed by regulations under paragraphs 7, 9 and 11 if the Commissioners are satisfied that the person is digitally excluded, and (b) for a partnership to be exempt from requirements imposed by regulations under paragraphs 7, 10 and 11 if the Commissioners are satisfied that the partnership is digitally excluded." Other exemptions exist alongside it. Our Making Tax Digital exemption guide sets out which ones and how to apply.

Get the deadlines into whatever you already use for renewals. Four fixed submission dates a year behave exactly like certificate expiries — they are known in advance and unforgiving when missed. Our Certificate Expiry Tracker is built for that shape of obligation, and our Making Tax Digital deadlines guide lists the dates.

For the regime as a whole — what changes, what a quarterly update contains, and why holiday lets sit inside it since the FHL rules ended — start with our Making Tax Digital for landlords guide.

Sources

• GOV.UK — Check if you're eligible for Making Tax Digital for Income Tax
• GOV.UK — Work out your qualifying income for Making Tax Digital for Income Tax
• Legislation.gov.uk — Income Tax (Digital Obligations) Regulations 2026, regulation 25
• Legislation.gov.uk — regulation 26 (determination of qualifying income)
• Legislation.gov.uk — regulation 27 (qualifying amount for a tax year)
• Legislation.gov.uk — regulation 23 (below-threshold exemption, entry condition)
• Legislation.gov.uk — regulation 24 (exit after three consecutive years, from 2029-30)
• Legislation.gov.uk — Taxes Management Act 1970, Schedule A1, paragraph 14

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Thresholds and regulations change, and this worksheet is a framework rather than a computation of your liability. Confirm the figures against GOV.UK or with a qualified accountant.