Is the Making Tax Digital threshold based on turnover or profit?

SHORT ANSWER

Turnover, not profit.

For Making Tax Digital for Income Tax, HMRC generally looks at your qualifying income from self-employment and property before expenses are deducted.

Let's use an example

Imagine you're self-employed. During the 2025/26 tax year:

Turnover

£40,000

Total money your business received.

Expenses

£15,000

What you spent running your business.

Profit

£25,000

What's left after expenses.

Even though your profit is only £25,000, your turnover is £40,000. Assuming the other conditions are met, you would be above the MTD threshold.

What this means

For MTD purposes, HMRC looks at your qualifying income from self-employment and property before expenses, not your profit after expenses.

If you have more than one qualifying source of income, you may need to consider them together.

Sources & technical notes HMRC guidance and where this information comes from.