Making Tax Digital can look straightforward when someone has one sole trader business and one bank account. It becomes less obvious when the same person has two businesses, earns rent from a property or also receives employment or dividend income.
Do all the figures go into one quarterly update? Does every source count towards the MTD income threshold? And do several rental properties need separate submissions?
The short answer is that HMRC combines relevant income when deciding whether MTD applies, but the digital records and quarterly updates may then need to be separated by business.
Here is a practical example.
Meet Maria: Two Businesses and Rental Income
Maria has the following income shown on her 2024/25 tax return:
| Income source | Gross income | Counts towards MTD qualifying income? |
|---|---|---|
| Freelance design business | £34,000 | Yes |
| Weekend catering business | £12,000 | Yes |
| Her share of UK rental income | £9,000 | Yes |
| Employment income | £8,000 | No |
Maria’s MTD qualifying income is £55,000. This is the combined gross income from her two sole trader businesses and her share of the UK property income, before expenses are deducted.
Her employment income does not form part of the MTD qualifying-income calculation.
Because her qualifying income on the relevant return is more than £50,000, Maria is within MTD for Income Tax from 6 April 2026, assuming she does not qualify for an exemption.
One Threshold Calculation, Three Sets of Records
Maria’s relevant gross income is combined to decide whether she is above the MTD threshold. Once she is using MTD, however, her three activities are not all placed into one bookkeeping pot.
She needs:
- Separate digital records for the freelance design business.
- Separate digital records for the catering business.
- Digital records for her UK property business.
HMRC requires a separate quarterly update for each source of self-employment income. Maria therefore sends one update stream for her design work and another for her catering business.
Her UK rental activity forms a third update stream.
What Maria Sends Each Quarter
For each quarterly deadline, Maria’s compatible software will prepare cumulative totals for:
- the design business income and expenses
- the catering business income and expenses
- the UK property business income and expenses
That means she has three update streams to keep on track, even though they relate to the same taxpayer and use the same quarterly deadlines.
Each update covers the period from the beginning of the tax year to the end of the relevant update period. The second update therefore contains cumulative figures to that point in the year, not just transactions from the second quarter.
Using one accounting package may make the process easier, but the software must still keep the businesses clearly separated and submit the correct totals for each one.
What if Maria Owns More Than One UK Rental Property?
UK properties are normally treated together as one UK property business.
If Maria later owns two UK rental properties, she will not usually send a completely separate quarterly update for each address. The income and expenses from those UK properties will form part of the same UK property business update.
She should still keep enough detail in her bookkeeping to understand how each property is performing and support the figures if questions arise.
If a property is jointly owned, Maria generally records her own share of the relevant income and expenses. There are also particular simplifications available for jointly let property, so the bookkeeping setup should reflect her circumstances.
Foreign property income may need different treatment and should be checked separately.
What About Employment, Dividends and Partnership Income?
Not every type of income creates another quarterly update.
Employment income and dividends do not count towards the MTD qualifying-income threshold and are not reported through business quarterly updates. A share of partnership profit received as an individual partner is also excluded from MTD qualifying income.
These amounts may still need to be included in the annual tax return. HMRC may add some information it already holds, while other income or gains may need to be entered through the MTD-compatible software before the tax return is submitted.
This distinction is important: income can be relevant to the annual tax return without being part of the MTD quarterly-update system.
What if One Business Makes a Loss?
The MTD threshold is based on gross qualifying income, not the final profit after expenses.
Suppose Maria’s catering business has £12,000 of sales but makes very little profit after food, equipment and other allowable costs. The £12,000 gross income is still included when working out her qualifying income.
A loss in one business does not simply reduce the gross income from another business for the purpose of deciding whether she is above the MTD threshold.
What if One Business Is Very Small?
A small second business can still matter.
In Maria’s example, neither the design business nor the catering business exceeds £50,000 on its own. It is the combined relevant income, including property income, that brings her above the threshold.
Once Maria is required to use MTD, HMRC guidance says that each source of self-employment income needs its own digital records and quarterly updates. The fact that the catering activity is smaller does not mean it can simply be mixed into the design business records.
A Practical Setup for Multiple Income Sources
Someone in Maria’s position should consider the following setup:
- Use a separate business bank account or clear bank-feed rules for each trade where practical.
- Create distinct businesses or ledgers within the accounting software.
- Give invoices and receipts a clear business or property label.
- Reconcile each activity separately.
- Check that the software supports all the required MTD update streams.
- Keep a quarterly checklist showing whether every business update has been reviewed and sent.
- Make sure personal, employment and company transactions are not mixed into sole trader records.
Clear separation makes quarterly reporting easier, but it also gives a more useful view of which activities are profitable and where cash is being generated or spent.
A Simple MTD Map for Maria
Maria’s position can be summarised like this:
| Activity | Digital records | Quarterly update |
|---|---|---|
| Freelance design | Separate records | Separate update stream |
| Catering | Separate records | Separate update stream |
| UK rental property | UK property business records | Separate property update stream |
| Employment | Not part of business digital records | No quarterly business update |
At the end of the tax year, Maria uses compatible software to make any necessary tax and accounting adjustments, add or check her other taxable income, review the calculation and submit her annual tax return.
How AA&R Certified Accountants Can Help
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Multiple income sources are one of the areas where an early MTD review can prevent confusion later.
AA&R Certified Accountants can help you work out which income counts towards the threshold, identify how many sets of digital records and quarterly updates you need, and configure your bookkeeping so each business remains clearly separated.
We can also manage the quarterly updates, review jointly owned property income and make sure employment, dividends or partnership income are dealt with at the correct stage.
Related reading:MTD for Landlords With Jointly Owned Property: What You Need to Report
If you have more than one business, rental income or a mixture of income sources, contact AA&R Certified Accountants for a clear review of how MTD applies to you.
Sources Checked
- GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
- GOV.UK: Create digital records for Making Tax Digital for Income Tax
- GOV.UK: Send quarterly updates for Making Tax Digital for Income Tax
- GOV.UK: Submit your tax return using Making Tax Digital software
- GOV.UK: More than one trade, profession or vocation — HS220 (2026)