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Making Tax Digital 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.

Please note:

FreeAgent’s MTD for Income Tax functionality is currently in pilot. Therefore, you’ll only have access to the functionality if your business is eligible for HMRC’s pilot scheme and meets FreeAgent’s eligibility criteria.
This functionality is not currently available for unincorporated landlord FreeAgent accounts. However, we plan to support this shortly and will let you know once it is available.
You’ll need full (level 8) access to enter adjustments and allowances to send to HMRC as part of a quarterly update or at the end of the year.
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.

You may need to enter adjustments such as a basis period adjustment, or allowances such as Annual Investment Allowance. If you’re not sure whether you need to enter a particular adjustment or allowance, please speak to your accountant.

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.

Adjustment types listed on 'Add an Adjustment' drop down menu.

Making Tax Digital for Income Tax adjustments

The table below outlines what each of the adjustments are used for and their corresponding box on the old style Self Assessment tax return.

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 5 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.

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.

Allowance types listed on 'Add an Allowance' drop down menu.

Making Tax Digital for Income Tax allowances

The table below outlines what each of the allowances are used for and their corresponding box on the Self Assessment tax return.

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 5 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: the special rate pool a single asset pool (for example, because you have chosen to treat them as ‘short life’ assets or you’ve used them outside your business)	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: parts of a building considered integral - known as ‘integral features’ items with a useful life of at least 25 years from when they were new solar panels thermal insulation you’ve added to a building cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it	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: 'unused and not second hand' designed mainly for carrying goods or ‘burden’ unable to emit CO2 by being driven registered for use on the road	Box 52 in the Self-employment (full) pages.

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