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Making Tax Digital when you have multiple income streams. How does it work?

If you earn money from different places – maybe a day job, plus a side hustle or rental income – it can make tax feel a bit messy. And with Making Tax Digital (MTD) arriving for more people from April 2026, you might be wondering how it affects you.

Here’s a simple guide to how MTD works if you’ve got more than one income stream. Before we get into it, a quick reminder that we can’t give you tax or financial advice. You’ll need to speak to a professional adviser for that.

A quick refresher: What is Making Tax Digital?

MTD is a government scheme replacing the annual Self Assessment return with a more modern digital system. If you’re self-employed or earn property income, you’ll need to:

  • Keep digital records

  • Send quarterly updates to HMRC

  • Submit an end of year tax return – this is an annual step where you check everything you’ve reported during the year, add any missing details (like reliefs or adjustments), and then confirm the full, final figures to HMRC. It works like a final tidy up and sign-off.

It’s essentially swapping one big annual sprint for smaller, more manageable check-ins.

Who does MTD apply to? 

From April 2026, MTD becomes mandatory if your combined self-employment and property income is £50,000+. From April 2027, the threshold drops to £30,000+, and from April 2028 it drops to £20,000+. 

Employees have tax deducted from their pay via a process called Pay As You Earn (or PAYE). PAYE income doesn’t count toward the threshold. It only applies to money you earn through self-employment and/or property.

How MTD works when your income comes from multiple places

MTD for income tax is only for sole traders (self-employed income) and landlords (property income). It doesn’t apply to limited companies, so if you’re a director of a limited company, that income isn’t included in MTD.

Here’s how that works in real life:

  • Each registered trade is treated separately: if you’re a sole trader with more than one trade registered with HMRC, you’ll keep digital records and send quarterly updates for each one. For example, if you have two registered trades, you’ll send 8 quarterly updates a year.

  • PAYE and self-employment can happily sit side by side: this is very common (and totally fine). Your PAYE job stays as it is – your employer takes care of the tax – and only your self-employed income falls under MTD.

  • Property income is its own income source: if you earn rental income, it counts as its own income source under MTD. If the rental income comes from a jointly owned property, you’ll only report your share of the income and expenses.

Everything is then pulled together into one end of year tax return, even if you’ve sent multiple quarterly updates for different income sources along the way.

Example 1: Keith, who is self-employed and runs two small businesses

Keith has:

  • A home baking business

  • A separate dog-walking business

Each counts as its own income source. Under MTD, he will:

  • Keep separate digital records for each business

  • Submit quarterly updates for each business

  • Submit an end of year tax return. This is not per business; it’s one return to cover all income sources

Even if one business is tiny and the other is his main gig, HMRC still treats them individually.

Example 2: Cat, part-time PAYE and part-time self-employed

Cat works three days a week in a PAYE job and does freelance digital illustration on the side.

Because PAYE income doesn’t count toward MTD, only Cat’s freelance income matters. If the illustration work brings in £50,000+ from April 2026 (or £30,000+ from April 2027, or £20,000 from April 2028), Cat will:

  • Keep digital records for the freelance business

  • Submit quarterly updates for that business only

  • Submit an end of year tax return

Her employer will continue to deduct tax via PAYE. Her annual return will include details of all her taxable income and tax deducted at source.

Example 3: Tom and Priya, who jointly rent out a flat

Tom and Priya rent out a flat they own together. They split everything 50/50. For MTD, each one:

  • Reports their half of the rental income and expenses

  • Submits their own quarterly updates

  • Completes their own end of year tax return

It doesn’t matter that the property’s shared – tax reporting is individual.

The bottom line

MTD can feel like a big shift, but it’s really about bringing clarity and consistency to the tax process. Whether you’re juggling two businesses, freelancing alongside a PAYE job, or sharing rental income with someone else, the system is designed to keep things organised – not overwhelm you.

You can file tax straight from Monzo to HMRC, ready for HMRC’s new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.

Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.