Enter adjustments and allowances for MTD for Income Tax
This article provides a simple guide on how to enter accounting adjustments or allowances to send to HMRC for Making Tax Digital (MTD) for Income Tax using FreeAgent.
You may need to enter adjustments or allowances such as a basis period adjustment. If you’re not sure whether you need to enter an 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.
You can enter the information at the end of the tax year to include it in your end-of-year update or enter it earlier to automatically include it in your quarterly update information. This information must be submitted to HMRC before making your final declaration.
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.
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.
- 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 enter adjustments using journal entries, you can choose to include them on 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 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.
- If you have a FreeAgent Practice Dashboard, you’ll need to switch to your client’s account to follow the steps below once you’ve set up your practice and clients for MTD for Income Tax.
- 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.
1. Navigate to the Annual summary
Navigate to the ‘Taxes’ tab at the top of the screen and select ‘Income Tax’ from the drop-down menu.
Select the relevant tax year from the list.
Select the ‘Annual summary’ tab.
2. Enter any adjustments or allowances
If you need to, you can adjust any of the figures in the Adjustments or Allowances sections.
Add an adjustment
To add an adjustment, select ‘Add an Adjustment’ and select the type of adjustment you wish to report from the drop-down menu. If you’re unsure which figures need to be included in these boxes, please speak to your accountant.
Find out more about what the different adjustments mean and how they correspond to the old Self Assessment forms.
Enter the new value in the ‘Amount’ field and select ‘Add Adjustment’ to complete the process. If you need to add an adjustment to reduce your figures, enter a minus in front of the amount.
To edit an adjustment, select ‘Edit’ to the right of the adjustment and to remove an adjustment, select the cross ‘X’.
Add an allowance
To add an allowance, select ‘Add an Allowance’ and select the type of allowance you wish to report from the drop-down menu. If you’re unsure which figures need to be included in these boxes, please speak to your accountant.
Find out more about what the different allowances mean and how they correspond to the old Self Assessment forms.
Enter the new value in the ‘Amount’ field and select ‘Add Allowance’ to complete the process.
To edit an allowance, select ‘Edit’ to the right of the allowance and to remove an allowance, select the cross ‘X’.
When you send your next quarterly or end-of-year update to HMRC, any information entered will be included in your next submission and used by HMRC to calculate your tax estimate. This information must be submitted to HMRC before making your final declaration.