Determining qualifying income for Making Tax Digital exemptions

This guidance outlines how to calculate qualifying income for the purpose of Making Tax Digital for Income Tax exemptions. It defines qualifying income as the total gross amount from relevant activities before deductions, or the net amount if gross figures are not required. Certain income sources, such as qualifying care receipts and amounts received by a trustee, are excluded from the calculation.

What it means for a practice

• You must identify if an amendment to a tax return increases qualifying income after the start of the relevant tax year, as these do not count toward digital obligation thresholds.
• For accounting periods that are not 12 months long, income must be adjusted proportionately unless this leads to an unreasonable outcome.
• If a tax year has ended without a notice to file, qualifying income is based on the gross amount provided in the latest quarterly update for those required to submit them.