MTD for Income Tax adjustments and allowances
This article explains what each of the adjustments and allowances are for Making Tax Digital (MTD) for Income Tax.
You may need to enter adjustments such as a basis period adjustment, or allowances such as Annual Investment Allowance, when sending a quarterly update or end-of-year update to HMRC.
If you’re not sure whether you need to enter a particular adjustment or allowance, please speak to your accountant. If you’re not currently working with an accountant, you may wish to find one through FreeAgent CoPilot.
Please note:
- FreeAgent’s MTD for Income Tax functionality is available for sole traders and unincorporated landlords. Read our fast-track guides for sole traders and landlords for MTD for Income Tax.
- If you have more than one income stream, for instance if you're self-employed and also a landlord, you'll need a sole trader and an unincorporated landlord account in FreeAgent. You can find out what counts as multiple income streams, as well as tips for managing more than one income stream, in our how to efficiently manage multiple income streams guide.
- You’ll need full (level 8) access to enter adjustments and allowances to send to HMRC as part of a quarterly update or end-of-year update.
- If you use FreeAgent with your accountant, they may submit your quarterly updates, end-of-year updates and/or final declarations on your behalf and restrict your ability to access and submit these. Please speak to your accountant if you have any questions or want to be able to access these. FreeAgent is unable to change these permissions for you.
- We are not authorised by HMRC to provide accounting or tax advice. Therefore, FreeAgent’s support team cannot help you with adjustments and allowances. If you’re unsure which adjustments and allowances you need to make, please speak to your accountant or to HMRC.
Adding adjustments
To add an adjustment, select ‘Add an Adjustment’ on the Annual Summary page and select the type of adjustment you wish to report from the drop-down menu.
Please see below for details on what each of the adjustments are used for and their corresponding boxes on the Self Assessment tax return for sole traders and landlords.
Making Tax Digital for Income Tax adjustments for sole traders
The table below outlines what each of the adjustments are used for and their corresponding box on the old style Self Assessment tax return, if you have a sole trader account type.
| Adjustment | What it’s used for | Matching box on Self Assessment tax return |
| Accounting Adjustment | Adjustment for change of accounting practice or adjustment for accruals and prepayments. | Box 71 in the Self-employment (full) pages. |
| Averaging Adjustment | A special relief available for creators of literary or artistic works under which they can claim to add together their profits for two years and be taxable on the average of those profits if certain conditions are met. This helps to even out fluctuating results. | Box 72 in the Self-employment (full) pages. |
| Balancing Charge BPRA |
An initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area back into use. Business Premises Renovation Allowance (BPRA) is no longer available for expenditure incurred after 5th April 2017. |
Box 59 in the Self-employment (full) pages. |
| Balancing Charge Other | Balancing charge on sales of assets or on the cessation of business use. | Box 26 in the Self-employment (short) pages or Box 59 in the Self-employment (full) pages. |
| Basis Adjustment | If your basis period is not the same as your accounting period, enter the adjustment needed to arrive at the profit or loss for the basis period. | Box 68 in the Self-employment (full) pages. |
| Goods and Services for Own Use | If you, or your family or friends, take any stock or manufactured goods out of your business, or you provide any services to your family and friends, you must include the value (and not the cost to you) of what was taken out or provided, unless you have already included such value in the 'turnover' entry on the Income page. | Box 27 in the Self-employment (short) pages or Box 60 in the Self-employment (full) pages. |
| Non Taxable Profits | To make adjustments to exclude income that you don’t pay tax on. | Box 62 in the Self-employment (full) pages. |
| Outstanding Business Income | An adjustment if you need to include any other business income that’s not included on your tax return. | Box 75 in the Self-employment (full) pages. |
| Overlap Relief Used | You could use overlap relief if your accounting end date does not align with the tax year, has been changed to align to the tax year but you did not use any overlap relief due, or was changed during the 2023 to 2024 tax year, but does now align with the tax year. Please note that overlap relief cannot be claimed for tax years after 2023/24. | Box 69 in the Self-employment (full) pages. |
Making Tax Digital for Income Tax adjustments for unincorporated landlords
The table below outlines what each of the adjustments are used for and their corresponding box on the old-style Self Assessment tax return, if you have an unincorporated landlord account type.
| Adjustment | What it’s used for | Matching box on Self Assessment tax return |
| Balancing Charge BPRA | An initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area back into use. Business Premises Renovation Allowance (BPRA) is no longer available for expenditure incurred after 5th April 2017. | Not applicable since this allowance is no longer available. |
| Balancing Charge Other | Balancing charge on sales of assets or on the cessation of business use. | Box 31 in the UK Property pages. |
| Private Use Adjustment | An adjustment if you need to restrict expenditure claimed for private use. | Box 30 in the UK Property pages. |
Adding allowances
To add an allowance, select ‘Add an Allowance’ on the Annual Summary page and select the type of allowance you wish to report from the drop-down menu.
Please see below for details on what each of the allowances are used for and their corresponding boxes on the Self Assessment tax return for sole traders and landlords.
Making Tax Digital for Income Tax allowances for sole traders
The table below outlines what each of the allowances are used for and their corresponding box on the Self Assessment tax return, if you have a sole trader account type.
| Allowance | What it’s used for | Matching box on Self Assessment return |
| Allowance on Sales | Where you’ve disposed of assets for less than their value. | Box 56 in the Self-employment (full) pages. |
| Annual Investment Allowance |
You can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax. If you sell the item after claiming AIA you may need to pay tax. |
Box 23 in the Self-employment (short) pages or Box 49 in the Self-employment (full) pages. |
| Business Premises Renovation Allowance |
An initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area back into use. Business Premises Renovation Allowance (BPRA) is no longer available for expenditure incurred after 5th April 2017. |
Box 55 in the Self-employment (full) pages. |
| Capital Allowance Main Pool |
You can claim 18% tax relief on all ‘plant and machinery' you buy, unless the items need to go into:
|
Box 50 in the Self-employment (full) pages. |
| Capital Allowance Single Asset Pool | Items of equipment, including cars, you use for both business and private purposes do not go into your main or special rate pool. Instead, you put the business proportion of the cost of each asset into its own single asset pool. | Box 50 or 51 in the Self-employment (full) pages. |
| Capital Allowance Special Rate Pool |
You can claim 6% tax relief on:
|
Box 51 in the Self-employment (full) pages. |
| Electric Charge Point Allowance | 100% first-year allowance (FYA) for expenditure incurred on electric charge-point equipment. | Box 54 in the Self-employment (full) pages. |
| Enhanced Capital Allowance | Available on designated plant and machinery which uses energy efficiently, reduces water use or improves water quality, can write off 100% of the cost against the taxable profits of the period in which the investment is made. | Box 55 in the Self-employment (full) pages. |
| Enhanced Structured Building Allowance | You can claim enhanced structures and buildings allowance relief when you incur qualifying expenditure on structures and buildings in a special tax site. | Box 25.2 in the Self-employment (short) pages or Box 53.1 in the Self-employment (full) pages. |
| Structured Building Allowance | If you build, buy or lease a structure and all construction contracts were signed on or after 29th October 2018, you may be able to claim 3% tax relief. | Box 53 in the Self-employment (full) pages. |
| Trading Income Allowance | You can claim trading income allowance of up to £1,000 per year instead of using your actual costs against your income to calculate your profit. The same applies to income from property which has a separate additional £1,000 allowance, but you would need to report this with your property income, not your self-employment. | Box 10.1 in the Self-employment (short) pages or Box 16.1 in the Self-employment (full) pages. |
| Zero Emissions Car Allowance | 100% first-year allowance for qualifying expenditure on zero-emission cars. | Box 24.1 in the Self-employment (short) pages or Box 52.1 in the Self-employment (full) pages. |
| Zero Emissions Goods Vehicle Allowance |
100% first-year allowance on zero-emission goods vehicles. To qualify for the allowance the vehicle must be:
|
Box 52 in the Self-employment (full) pages. |
Making Tax Digital for Income Tax allowances for unincorporated landlords
The table below outlines what each of the allowances are used for and their corresponding box on the Self Assessment tax return, if you have an unincorporated landlord account type.
| Allowance | What it’s used for | Matching box on Self Assessment return |
| Annual Investment Allowance | You can deduct the full value of an item that qualifies for annual investment allowance (AIA) from your profits before tax. | Box 32 in the UK Property pages. |
| Business Premises Renovation Allowance |
An initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area back into use. Business Premises Renovation Allowance (BPRA) is no longer available for expenditure incurred after 5th April 2017. |
Not applicable since this is no longer available. |
| Cost of Replacing Domestic Items | A deduction for the replacement (not initial purchase) of certain domestic items. | Box 36 in the UK Property pages. |
| Enhanced Structured Building Allowance | You can claim enhanced structures and buildings allowance relief when you incur qualifying expenditure on structures and buildings in a special tax site. | Box 33.2 in the UK Property pages. |
| Other Capital Allowance | For claiming capital allowances for any other equipment or vehicles for your furnished holiday let (FHL). | Box 35 in the UK Property pages. |
| Property Income Allowance | A tax relief or exemption of up to £1,000 per tax year for individuals who have to declare the income they earn from property or land ownership to HMRC. | Box 20.1 in the UK Property pages. |
| Structured Building Allowance | If you build, buy or lease a structure and all construction contracts were signed on or after 29th October 2018, you may be able to claim 3% tax relief. | Box 33.2 in the UK Property pages. |
| Zero Emissions Car Allowance | 100% first-year allowance for qualifying expenditure on zero-emission cars. | Box 34.1 in the UK Property pages. |
| Zero Emissions Goods Vehicle Allowance |
100% first-year allowance on zero-emission goods vehicles. To qualify for the allowance the vehicle must be:
|
Box 34 in the UK Property pages. |