When submitting your updates for Making Tax Digital (MTD) for Income Tax, your income and expenses must be categorized correctly. This guide breaks down the three primary return types—Trading Updates (Self-Employment), UK Property, and Foreign Property—along with their specific categories and descriptions to help you accurately file your returns.
1. Trading Updates / Self-Employment
This section applies to sole traders and self-employed individuals. These categories track the day-to-day income and running costs of your business.
Income Categories
Turnover: The takings, fees, sales, or money earned by your business. This represents income associated with the running of the business.
Other Income: Any other business income not included in turnover that is associated with the running of the business.
Tax taken off Trading Income: Other tax taken off trading income apart from Construction Industry Scheme (CIS) deductions.
Expenses (& Disallowable Expenses)
Cost of Goods: The cost of goods bought for resale or goods used, which are associated with the running of the business.
Payments to Subcontractors: Payments made to Construction Industry subcontractors for business-related operations.
Wages & Staff Costs: Wages, salaries, and other staff costs associated with running the business.
Car, Van & Travel Expenses: Travel expenses, vehicle costs, and transport fees associated with running the business.
Premises Running Costs: Rent, rates, power, and insurance costs incurred for your business premises.
Maintenance Costs: Repairs and renewals of business property and equipment.
Admin Costs: Phone, fax, stationery, and other typical office expenses.
Business Entertainment Costs: Expenses associated with business entertainment.
Advertising Costs: Marketing and advertising costs required to run your business.
Interest on Bank Loans: Interest paid on bank and other business-related loans.
Finance Charges: Bank, credit card, and other financial charges associated with running the business.
Irrecoverable Debts: Irrecoverable debts that have been officially written off.
Professional Fees: Accountancy, legal, and other professional service fees.
Depreciation: Depreciation expenses and any loss or profit realized on the sale of business assets.
Other Expenses: Any other miscellaneous business expenses associated with running the business.
2. UK Property
Use these categories if you receive rental income from residential or commercial properties located within the UK.
Income Categories
Premiums of Lease Grant: Premiums received for the grant of a lease and other lump sums paid to possess a property.
Reverse Premiums: The amount paid by a landlord or outgoing tenant to induce a new tenant to enter into a leasehold agreement.
Period Amount: Total rents received from the property (excluding ground rents, rent charges, and rent-a-room rental income).
Tax Deducted: Any tax that has already been deducted from your rental income.
Other Income: The total amount of rent and any additional income generated from services provided to tenants.
Rent A Room - Rents received: Total rents received specifically from Rent a Room properties.
Expense Categories
Premises Running Costs: Rent, rates, insurance, ground rents, and other property-running costs.
Repairs & Maintenance: General property repairs and ongoing maintenance.
Financial Costs: Loan interest and other property-related financial costs.
Professional Fees: Legal, management, and other professional fees connected to your property business.
Cost of services: The cost of services provided to tenants, including any staff wages.
Other: Any other allowable property-related expenses.
Residential Financial Cost: The residential financial cost deductible from rental income for tax relief.
Travel Costs: Car, van, and travel costs incurred while running your property business.
Residential Financial Costs Carried Forward: The amount of restricted residential financial costs being carried forward to future tax years.
Rent A Room - Amount Claimed: The specific amount of UK Furnished Holiday Lettings rent claimed under the scheme.
3. Foreign Property
This section tracks income and expenses generated from overseas rental properties.
Income Categories
Rent Income - Rent Amount: The total rent and any other general income generated from the foreign property.
Premiums of Lease Grant: Premiums received for granting a lease and other lump sums paid to possess the property.
Other Property Income: Miscellaneous income from the property, such as rent charges, ground rents, income from letting others tip waste on your land, or income from a caravan/houseboat at a fixed location.
Foreign Tax Paid or Deducted: The total amount of foreign tax already paid or deducted from your overseas income.
Special Withholding Tax or UK Tax Paid: Tax withheld (in UK Pounds) on certain payments to UK residents, or UK Tax paid from rental income (applicable to non-resident landlords only).
Expense Categories
Premises Running Costs: Rent, rates, insurance, ground rents, and other structural running costs.
Repairs & Maintenance: General upkeep, repairs, and maintenance on the foreign property.
Financial Costs: Loan interest and associated financial costs.
Professional Fees: Legal, management, and professional service fees.
Cost of services: The cost of providing services to tenants, including any relevant wages.
Other: Any other allowable foreign property expenses.
Residential Financial Cost: The residential financial cost deductible from foreign rental income for tax relief purposes.
Travel Costs: Car, van, and travel expenses incurred while managing the foreign property business.
Brought Forward Residential Financial Cost: The amount of relief brought forward from previous years for restricted residential financial costs.