Making Tax Digital for Income Tax changes how some self-employed people keep records and report to HMRC. It started in April 2026, but only for people with higher incomes, and it reaches smaller businesses in stages. This guide explains whether and when it applies to a side hustle. If you haven't registered as self-employed yet, start with do I need to register.
What Making Tax Digital for Income Tax is
If you're in it, instead of one tax return a year you:
- keep your business records digitally, using software that works with HMRC
- send HMRC a summary of your income and costs every quarter
- finish the year with a final return, still due by 31 January
It changes how you report, not how much tax you pay.
When it applies
| Your qualifying income was over | In the tax year | You start using it from |
|---|---|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
HMRC decides from your tax return for the earlier year. For example, it used 2024 to 2025 returns to decide who started in April 2026.
What counts as qualifying income
Qualifying income is your self-employment and property income, before expenses. It doesn't include:
- your salary from a job
- money from selling your own old things
- savings interest or dividends
Example: you earn £40,000 from a job and your side hustle takes £8,000 a year. Your qualifying income is £8,000, so Making Tax Digital doesn't apply to you.
What it means for side hustles
If your side hustle takes less than £20,000 a year, Making Tax Digital doesn't apply to you yet. The ones to watch:
- Takings heading past £20,000 in the tax year 2026 to 2027: you'd start from 6 April 2028.
- Takings over £30,000 in the tax year 2025 to 2026: you'd start from 6 April 2027.
- Side hustle plus rental income: they're added together for the threshold.
Note that the threshold uses takings before costs. A side hustle with £25,000 of sales and £15,000 of costs still counts as £25,000.
Software
If it applies to you, you'll need software that works with Making Tax Digital for Income Tax. HMRC publishes a list of compatible software on GOV.UK. Check it before you choose, and start using it before the date that applies to you.
If you can't use digital tools
If it isn't reasonable for you to use software, for example because of age, disability or where you live, you can apply to HMRC to be exempt.
VAT is separate
Making Tax Digital for VAT is a different scheme. It only matters if you're VAT-registered, and you only have to register for VAT if your sales go over £90,000 in any 12 months.