In this article we look at what financial support is available to self-employed business owners who work from home.

Types of tax relief to claim when working from home as a self-employed worker

There is a whole array of tax relief available for self-employed workers, including part of the running costs of your home if that’s where you work from. Claiming can help keep cash flow healthy as well as your stress levels at bay.

What’s absolutely crucial when claiming any expenses is that you only claim the portion which relates wholly to your business. We cover this further in our article about claiming allowable expenses!

Typical examples of costs you can claim when working from home

• A portion of mortgage interest on your home (not including capital repayments)
• A portion of your rent, if you rent your property from a landlord
• Gas and electricity costs (heat and light) for the rooms which you use when working for your business
• Telephone and internet connection (based on a split between business and personal use)
• Repair or maintenance of a room that you use specifically for your job, such as a home office. You might also be able to claim for a portion of repairs or maintenance on the whole property, such as the roof. You can’t claim on a room which you don’t use for your work at all (e.g. the bathroom).

Claiming for water bills when working from home

Unfortunately claims for working from home don’t include water bills if your usage is only on a minor day-to-day basis.

Some businesses, such as a car washing service or home-working hairdresser, do require significant water usage. In this case you’ll need to apply to your provider for a separate charge, and then claim back the cost.

Calculating expenses for working from home

There are two methods to choose from when it comes to working out your self-employed WFH expenses:

• Simplified expenses: Use HMRC’s flat rate to claim tax relief based on how many hours you work from home per month
• Cost method: Work out what it actually costs you to work from home, so you can claim your business expenses accurately

Let’s break each of these methods down in more detail so you can make an informed choice on how you want to calculate and record your working from home expenses.

Simplified expenses

This is often the quickest and easiest way to calculate your claim for business expenses if you work from home. HMRC set flat rates based on how many hours you work from home:

• 25-50 hours of business use per month: Claim £10 flat rate per month
• 51-100 hours per month: £18
• 101+ hours: £26

The number of hours of business use might vary from month to the next – so be sure to keep records! For example, if you worked 30 hours from home one month (£10 flat rate) but 60 hours another month (£18 flat rate), you could claim a total of £28 for those two months.

The downside is that the simplified expenses method can only be used by those who work more than 25 hours per month from home. So, if you run a side hustle in your spare time and spend fewer than 25 hours WFH, this might not be the best option for you.

Plus, it’s important to note that the flat rate scheme used for the simplified expenses method doesn’t include telephone or internet expenses. You’ll need to calculate your actual usage using the cost method in order to claim these.

It’s also worth working out your actual costs anyway. HMRC’s flat rates may not be enough to cover your actual costs, so check which method if most appropriate for your business!

Cost method

The cost method can seem a bit more complicated, because you’ll need to figure out what part of your household bills are incurred as a result of your business operations. This method is a good option if:

• You work from home less than 25 hours per month
• You want a more accurate representation of your actual WFH costs
• You need to work out and claim a portion of telephone or internet expenses (as these costs cannot be recorded using the simplified expenses method)
• Simplified expenses flat rates aren’t enough to cover the costs incurred

This method of calculation also helps you understand where the costs are in your business, which is always good news for budgeting and cash flow.

An example of the cost method in action

If you have a house with 4 rooms and one of them is your home office, 25% of your home qualifies as being directly related to the running of your business.

So, if your gas bill for the month is £100, you could claim 25% of this as an allowable WFH expense – £25.

If more than one person uses the space, you will need to divide any allowable expenses between you – you won’t be allowed to each claim the full amount!

Looking for further support for your business? Head over to our info hub where you’ll find a whole host of helpful resources.

The post How Do Self-Employed People Claim Expenses for Working from Home? appeared first on The Cheap Accountants.

Sending your tax return doesn’t just deal with income tax though, and your bill can also include any National Insurance that you owe on your self-employment income. In this article we’ll explain how National Insurance works for self-employed people.

What is National Insurance?

Anyone aged 16 or over, up until they reach State Pension age, pays National Insurance on any employment or self-employed income they get over a specific amount.

This wording is quite important, because not all types of income are subject to National Insurance. For instance, dividends, and sometimes even rental income you get from property if this isn’t your main business, can be free from NI.

Why do I need to pay National Insurance if I work for myself?

Making NI contributions gives you entitlement to certain benefits and the State Pension. National Insurance contributions also help to fund the NHS.

How much NI will I need to pay?

There are different types of National Insurance, known as classes, and these have different thresholds and rates. The type you pay depends on how much you earn from a particular source of income. For instance, employees normally pay Class 1 NI on income they earn from an employer, whereas self-employed people pay Class 4 NI.

Class 4 National Insurance for self-employed people

Class 4 NI is charged as a percentage of the profits you make from being self-employed.

• Lower Profits Limit (LPL): You’ll pay NI at a rate of 6% on any profits you earn in 2025/26 and 2026/27 which are over the £12,570 Lower Profits Limit
• Upper Profits Limit (UPL): You’ll then pay Class 4 NI at a rate of 2% on any profits over £50,270

What happens if I don’t pay NI?

Paying Class 4 NI is mandatory if your profits reach the threshold, but not everyone will earn enough to reach it. If your profits are above the Small Profits Threshold (£7,105 in 2026/27, or £6,845 for the 2025/26 tax year) then you’ll get NI ‘credits’, which protects your entitlement. If your profits are below it, then you might consider making voluntary contributions to cover any gaps.

For self-employed people this means making Class 2 contributions (which used to be compulsory, but are now voluntary) at a flat rate of £3.50 per week for the 2025/26 tax year, or £3.65 for 2026/27.

How do I register to pay self-employed National Insurance?

You’re automatically signed up for National Insurance and any other tax contributions that you need to make when you register for Self Assessment with HMRC.

When and how do I pay my NICs?

HMRC will use the information you provide in your Self Assessment tax return to work out your tax bill. The total amount will consist of any income tax and National Insurance you owe, as well as any other taxes you need to pay.

The deadline to submit your tax return and pay the bill for Self Assessment is 31st January following the end of the tax year that you need to report. You can submit your return much earlier, but this doesn’t affect the payment deadline – which can be useful if you need to budget for it!

 
Find out more about getting support with your finances and tax in our guide to finding the right accountant.

The post How Self-Employed People Make National Insurance Contributions appeared first on The Cheap Accountants.

From selling the odd jumper that doesn’t fit you anymore, to running a business selling goods online, a whole spectrum of different scenarios might apply. Your unique circumstances will dictate whether you need to register with HMRC to pay tax.

We’ll go over the various rules and regulations around online selling so you can work out which compliance boxes to tick off.

What are the tax reporting rules if I sell on online marketplaces?

Due to the number of people using online marketplaces like Vinted, Depop, eBay, Etsy, and beyond to sell online, the marketplaces are legally obligated to tell HMRC about what you earn from selling through their platforms if you’re classed as an online trader.

These regulations don’t just deal with the sale of physical items. Providing services or renting out accommodation are also covered, so you might also be affected if you supply anything through the likes of Fiverr, Uber and Airbnb.

Am I classed as an online trader?

Online trading generally applies to those who sell with the intention of making a profit through selling things online.

This also includes those who buy items with the specific intention of reselling them on platforms like Vinted, Depop, eBay, and Etsy at a higher price. In HMRC terms you’re classed as an online seller if you:

• Make more than 30 sales
• Receive more than €2,000 (equal to around £1,700)

Being classed as an online trader doesn’t necessarily mean you’ll have a tax bill

Meeting the criteria above simply means you’ve hit the threshold for a marketplace to pass your details on to HMRC based on the sales you make through that platform.

It doesn’t necessarily mean you’ll need to pay tax on them. Likewise, being under the criteria doesn’t mean you won’t have to pay tax on your earnings! We’ll explain this next.

Do I need to register with HMRC as an online seller and pay tax?

You will need to register with HMRC and report what you get as an online seller if the total income you receive from self-employment or other miscellaneous activities is more than the £1,000 trading allowance.

This means you can earn up to the sum of £1,000 from self-employment or miscellaneous trading each tax year without telling HMRC, or paying tax on those earnings.

You can benefit from this allowance even if you earn money from other sources, such as employment. You could earn wages from a part-time job, for instance, and still use the trading allowance against the income you generate from a self-employment side hustle selling things online.

So, if you make 35 online sales, you might not necessarily need to pay tax on anything if the total amount you receive from them is less than £1,000.

What happens if I earn more than the trading allowance?

If the money you make is more than the £1,000 trading allowance, then you’ll need to register for self-employment and submit tax returns to HMRC.

It’s really important that you keep records of your sales so that you know when it’s time to register. And remember, you only get the allowance once in a year, not a separate allowance for each platform!

Keeping good records will also help you stay on top of your ecommerce expenses – that way you’ll be able to offset them against your tax bill.

Whatever your circumstances, you must make sure you’re doing everything by the book. Even if it’s just an honest mistake, missing deadlines or holding information back from HMRC can lead to serious trouble and hefty fines!

 
Understanding the rules and regulations around when to tell HMRC if you’re selling things online can be complicated. Check out our accounting support hub for more help, or to ask a tax question.

The post Can I Sell Things Online Without Registering with HMRC? appeared first on The Cheap Accountants.

It’s a common misconception for franchises, but because they’re separate, franchisees record and pay tax just like any other business. We’ll look at how franchisees report and pay tax.

Do I need to submit tax returns if I’m a franchisee

Although you might be paying the franchisor fees to operate under their brand, HMRC treats the franchise like any other business, and expect it to pay taxes accordingly. You’re not part of their company, just paying to use their trademark and business model as if you were.

The fees you pay to the franchisor do not cover the tax you must pay on your profits as a franchisee.

Be careful around any franchise agreements which suggest they’ll take care of your tax reporting for you in case this is a potential red flag.

You’ll be operating a separate business, so you’re the one responsible! The way you pay tax on your franchising profits depends on how you register the business.

What kind of tax do franchisees pay?

Franchising describes a way of working rather than a tax structure, so you might operate your franchise as a sole trader, a limited company, or something else. This means that the taxes that you must pay as a franchisee depends on how you set up your business.

Most franchisees tend to register as a limited company, though you might also be a sole trader or in a partnership.

• A sole trader is a self-employed person who is the sole owner of the business – a professional one-person band if you like. Sole traders pay Income Tax and National Insurance on the profits they make in a tax year.
• A limited company is a separate legal entity, independent from its owner(s) or director(s), with its own unique liabilities and separate assets. They submit Company Tax Returns and pay Corporation Tax on their profits, and then individuals who pay themselves from the business will pay Income Tax on their own personal income.

Common types of tax for franchises

Once you know what type of business structure you will use to operate as a franchisee, you’ll have a better idea of the tax that you’ll need to pay, and how to pay it.

Income tax

UK taxpayers usually start to pay income tax on any money they earn above the £12,570 tax-free Personal Allowance threshold.

So, if you earn £25,000, deduct the personal allowance from it, leaving £12,430 of taxable income. The way that you pay income tax depends on how you earn the money:

• Employees pay income tax through their employers, who deduct it from their wages and pay it to HMRC on their behalf
• Sole traders pay income tax on the profits they make with their business. Because sole traders aren’t legally separate from the business, this means they pay income tax on all of the business’ taxable profits.
• The owner of a limited company is considered separate to their business, so they only pay income tax on money that the business pays to them as a salary. You might also pay yourself dividends, which are subject to dividend tax.

Corporation Tax

Limited companies pay Corporation Tax on the profits they make. So, if your franchise is set up as a limited company, the business will submit Company Tax Returns to report its income and expenses. Unlike Income Tax, there is no personal allowance relief on Corporation Tax, but there are other ways you can reduce your tax bill such as claiming expenses.

Value Added Tax (VAT)

Not all businesses need to register for VAT, though you’ll still pay VAT to your suppliers if they’re registered.

A business must register for VAT as soon as its taxable turnover reaches £90,000 in a 12 month period. This threshold takes gross sales into account – not profits.

Sometimes it’s useful for a business to register for VAT voluntarily before its taxable turnover reaches the current £90,000 threshold. For instance:

• The franchisor might require you to be VAT registered
• To get a VAT number in order to make the business look more professional
• To reclaim VAT that your business has paid on some items over the last 4 years
• If your business usually pays more VAT to suppliers than it would charge to customers (for instance if the things you sell are zero rated), then you’ll be able to reclaim the difference

Would a franchisee benefit from having an accountant?

Running a franchise can be complicated, and tax affairs can be confusing too. Anybody navigating the complexities of tax, legal regulations, and HMRC deadlines will benefit from having a tax accountant. Having a professional in your corner is a total no-brainer, franchisee or not.

They’re also an independent party! If you’re considering entering into a franchise, independent advice will help protect you, without the hard-sell of a franchisor.

 
Compare accountancy packages in our information centre.

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What is MTD for Income Tax?

MTD for Income Tax is part of the Government’s scheme to gradually digitise the process of submitting tax returns.

It basically means that some people will no longer submit the usual Self Assessment tax returns, and will instead be required to keep their income tax records digitally and submit updates to HMRC on a more regular basis.

Who’s affected?

MTD Income Tax (IT) is rolling out in phases depending on your ‘qualifying income’. You’ll need to comply with MTD rules if your self-employed and/or property income is:

• Over £50,000 in the 2024 to 2025 tax year
• Over £30,000 for the 2025 to 2026
• Over £20,000 for the 2026 to 2027 tax year

What counts as qualifying income?

Qualifying income is made up of the sole trader and property income you reported in the previous year’s Self Assessment tax return. Other sources of income (e.g. dividends, wages from an employer, etc.) don’t count towards your qualifying income, even if they appear on your Self Assessment.

For example, let’s say you have multiple streams of income; dividends, earnings from a side hustle arts and crafts store on Etsy, and you also get income from renting out your spare room.

HMRC uses the total of your side-hustle and rental earnings recorded in your tax return to determine whether or not you need to join Making Tax Digital.

How often do I need to send MTD Income Tax updates to HMRC?

Once you’re registered for MTD for Income Tax, you’ll need to send HMRC quarterly updates to report your income and expenses relating to any self-employed or property income from that period.

Then, after your final quarterly update, you’ll need to submit your MTD Income Tax return. This should include your self-employed and/or landlord income, as well as any other income you might have. For example, any dividends or capital gains from the time period covered by the return.

This is called a ‘final declaration’ and will replace Self Assessment if you’re now using Making Tax Digital. The deadline will still be 31st January following the end of the tax year it relates to (which makes it easier to remember!).

Do I need to keep separate records for each side hustle business?

Yes, because you’ll need to submit a separate quarterly update for each business – just like you’d report your multiple side hustles using different sections on your Self Assessment tax return.

Keeping separate records for each source of income will help to avoid confusion, making it easier to submit quarterly updates and, ultimately, your MTD Income Tax return.

Separating your digital income and expense records for each business is strongly recommended even if you don’t need to follow the MTD rules just yet. Having separate records makes it much simpler to review and understand how each business is performing individually.

At some point down the line, everyone will be registered for MTD, so why not get ahead of the curve and start digitising your records now?

Do I need an accountant to help me with MTD IT?

It’s not a requirement, so you can go it alone or you can hire an accountant to help you with Making Tax Digital (and your tax reporting in general).

Either way, an accountant can break it all down for you and simplify the process of submitting quarterly updates, as well as a final tax return. They’ll also help make sure you’re operating in the most tax-efficient way possible!

 
Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

The post Does MTD Income Tax Affect My Side Hustle? appeared first on The Cheap Accountants.

Well, to answer the first question, yes, you do need to include your salary information on your Self Assessment tax return, but this doesn’t mean you’ll need to pay tax on that money again.

Why do I need to include my wages on my tax return?

The amount of tax you pay depends on how much you earn in total during a tax year, so you’ll need to report all your income when you complete a Self Assessment tax return to make sure you pay tax correctly – even if you’ve already paid tax on some of it.

Do I actually need to submit a Self Assessment?

You’ll probably need to submit a Self Assessment, even though you’re employed and pay tax through the PAYE system, if you also:

• Have extra sources of income such as from self-employment, a side-hustle, dividends, or property
• Receive taxable benefits
• Earn over £60,000 and receive Child Benefit

Where do I include PAYE income on my Self Assessment form?

If you complete your Self Assessment online then this is really straightforward. You’ll be asked a series of questions to make sure you see the correct sections that are relevant to your circumstances.

If you have earned income from employment that has been taxed at source through PAYE, this should be recorded in the ‘Employment’ section of your Self Assessment tax return form.

Anyone who uses a paper-based form to submit their Self Assessment form will need to complete a supplementary SA102 form for each employment they had during that tax year. You’ll need to provide:

• Your employer’s name and PAYE reference number
• Pre-tax employment income
• The amount of tax you have already paid on your employment earnings
• Your employment expenses or benefits, if applicable

Paying Self Assessment tax through PAYE

If you’re employed and being paid through PAYE and you owe less than £3,000 in self-employed tax following your Self Assessment submission, you have the option to pay your tax bill via your tax code.

The benefit of this is that you can spread your tax payments out over the year, rather than paying in one lump sum, by simply bumping up the amount of tax you pay through PAYE each month.

Just be aware that your employer will see the change to your tax code, so they might ask questions! Important to keep that in mind if they don’t know about your side-hustle.

 
Find more business tips and expert advice on our website, or check out our go-to guide to finding the right accountant for you.

The post Do I Need to Show PAYE Income on my Self Assessment? appeared first on The Cheap Accountants.

What are capital allowances?

In simple terms, they’re a type of tax relief which businesses can claim when they invest in long-term assets. They were introduced to give businesses an incentive to invest in themselves over a longer period, benefitting the UK economy.

A long-term asset (also known as a ‘fixed’ or ‘capital’ asset) is one which a business can reasonably expect to use for 12 or more months. Things like machinery or vehicles are often used as an example.

The way it works is that claiming for capital allowances means you’re able to deduct part or all of the asset’s value against your tax bill, which in turn reduces the amount of tax you need to pay.

Depending on the type of capital allowance you claim, your tax savings may be instant in the year you purchase the asset, or spread across several years.

So, as well as claiming the cost of purchasing an asset, you can also claim capital allowances to cover the cost of maintaining it over a period of time. This is what makes capital allowances different from basic expenses, because you’re claiming the ongoing costs of owning the asset, not just the cost of buying it in the first place.

Who can claim for capital allowances?

Sole traders, partnerships, limited companies… Basically, anyone who owns a business, whether they pay Income or Corporation Tax, can claim capital allowances.

That said, the asset you’re claiming for must meet the criteria for the type of capital allowances you’re claiming.

What types of assets are eligible for capital allowances?

You can only claim capital allowances on assets you keep and use in your business, which means you must’ve purchased them.

Some of the rules sound a bit confusing, because they suggest you can claim capital allowances for lease items. This just means you can claim allowances for assets you own in order to lease out, rather than items that you’re leasing from somewhere else.

Other exemptions include assets you only use for the purposes of entertainment, in addition to things like buildings and plots of land. Typical examples of things you can claim capital allowances for include:

• Vehicles (cars, vans, trucks, etc.)
• Machinery
• Computers (plus software)
• Office equipment
• Fixtures and fittings
• The cost of renovating a building

Capital allowances can also be claimed if a business donates equipment or assets to charity.

Why is it important to claim capital allowances?

In short, doing so ultimately reduces your tax bill.

Beyond that, though, the general purpose of capital allowances is to give businesses relief from the cost of wear and tear on their capital assets, and also stimulate investment in assets that will provide a boost to productivity.

Even if you find you can’t use all of your allowance against your tax bill, you may be able to carry over whatever’s left to the following year and reduce the next year’s bill instead.

Does my accountant claim capital allowances for me?

It doesn’t have to be your accountant, and you can opt to do it yourself when filling in your tax return. It’s your responsibility to get it right!

Alternatively, you can enlist the services of a qualified accountant and have them do it for you.

Either way, it’s generally a good idea to have an expert look over your capital allowance calculations. They can be horribly complicated.

Your accountant will also be able to advise you before you make a purchase. They can walk you through the whole process and ensure you’re operating in the most tax-efficient way possible (which includes making the most of any allowances you may be entitled to), and timing your purchases to make the most of your allowances each year.

 
Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

The post An Overview of Capital Allowances appeared first on The Cheap Accountants.

What does tax avoidance look like?

This can vary, but it can include things like using complex company structures to separate businesses which would otherwise be linked. This can help a company or group of companies minimise tax by moving profits around or sharing losses.

There are other tactics too, such as disguising income by labelling it as a ‘loan’, and then the other company simply writing it off (which again is good for its own tax bill).

The danger of tax avoidance schemes

It can be difficult to know whether you’re getting good tax advice or being encouraged to join an avoidance scheme! Unfortunately, the result of joining such a scheme may leave you facing HMRC and result in you receiving a much larger bill – with penalties and all manner of legal trouble.

There are some indicators of tax avoidance routes that you should look out for, such as:

• The tax savings seem to good to be true, and it’s suggested you could earn a great deal without paying much tax at all
• The route your payments take to reach you seem extremely complex, and might go through multiple accounts, or multiple companies
• There are charges for joining the scheme, or the scheme has charges that are payable up front
• Transactions are labelled as ‘loans’ or something else which doesn’t reflect their actual nature
• Sales-like tactics to drive urgency for joining – “don’t miss out”

Practical tips for dealing with tax avoidance schemes

The first step is to hit pause! Some schemes are listed by HMRC as ones to avoid (which is ironic, considering they’re involved in tax avoidance), so it’s worth starting there.

It’s also useful to ask yourself if the scheme’s selling points make any real sense in terms of tax law. There are lots of tax allowances and relief schemes which are perfectly legitimite, but the promise of earning many thousands of pounds without paying tax should often be a red flag. You could ask the scheme provider to supply more information, or even the legislation which makes it acceptable.

HMRC and avoidance

HMRC take a very dim view of organised tax avoidance if it’s not in the spirit of the legislation. Some loopholes, such as diguised working, have been closed with the introduction of new rules (IR35 in this case) and this makes the tax system more secure.

Avoidance costs the compliant majority around £5 billion a year, and HMRC is constantly introducing tough new measures to tackle it. If you are unsure about a scheme, or want to find out more about legitimate tax planning, consult a reputable tax adviser.

Check your tax advisor is qualified

The term ‘accountant’ isn’t a protected title in the UK, so anyone can refer to themself as one – which is why it’s crucial to check they’re appropriately qualified!

The post What is Tax Avoidance? appeared first on The Cheap Accountants.

The disposal of an asset usually refers to the sale of it, but it can also mean giving it away, trading it for something else, or receiving compensation for its loss.

Who pays Capital Gains Tax?

It typically applies to individuals, and to business structures in which there’s no legal distinction between the business owner and the business (e.g. sole traders and partnerships).

In contrast, an incorporated business like a limited company won’t pay Capital Gains Tax if it makes a gain from an asset. Instead, companies pay Corporation Tax on any profits they make and this includes disposing of an asset.

You can work out if you need to pay CGT by adding together the total gains from each asset and deducting any allowable losses. You’ll pay Capital Gains Tax on any gains you make above the tax-free ‘annual exempt amount’. The exact allowance you’re entitled to depends on whether you’re an individual or a trustee.

• Individuals: the allowance is £3,000
• Trustees: it’s £1,500

If your total gains are below the allowance, you won’t need to report or pay Capital Gains Tax.

How much Capital Gains Tax will I need to pay?

Well, as mentioned above, there is a tax-free allowance available before you start paying Capital Gains Tax. You’ll only pay CGT on the gain, not the full amount you get, and you’ll only be taxed on any gains above the threshold.

For instance, if you spent money to buy the asset, then spent more on improvements, and then finally on advertising it for sale, you can deduct these amounts from the amount you got from its sale – because remember; you only pay CGT on the gain, not the total amount you receive.

The rate of CGT you pay on any gains above the allowance depends on what the asset is, as well as your Income Tax band. For the purposes of Capital Gains, assets are split into two groups: property, and ‘other chargeable assets’ – which basically means everything else!

For 2025/26, the rates are:

What assets are exempt from Capital Gains Tax?

Not everything you dispose of is subject to Capital Gains Tax, so there is some reprieve! You don’t have to pay CGT on gains from:

• Machinery
• Furniture
• Natural resources (e.g. coal and natural gas)
• Cars – but only if they’re not used for business purposes
• Things like gifts or investments

Although there’s a special category for Capital Gains on property, there are also times that property disposals will be exempt, too. For example:

• If the property in question is your only home, and you have lived in it almost exclusively (if not exclusively) for the whole time you’ve owned it
• You haven’t let any of it out or used part of it for business purposes
• You didn’t purchase the property with the express aim of profiting from it

How do I pay Capital Gains Tax if I owe it?

If you’re already registered for Self Assessment, you’ll need to report your gains in your annual tax return, although you’ll only pay CGT on anything above the allowance.

If you’re not registered, you only report your gains if the total gains you make in a year are more than the allowance (and you receive more than £50,000 in total from the associated transactions).

You’ll report your gains via the ‘real time’ Capital Gains Tax service, which requires you to sign in using your Government Gateway ID.

Note that this service can only be used to report gains on assets sold during the following tax years:

• 2024 to 2025
• 2025 to 2026

You won’t need to do anything if you’re not already registered for Self Assessment and the total amount of gains is below the annual exempt amount.

Can my accountant help me with my Capital Gains Tax?

The laws around Capital Gains Tax are pretty confusing. A qualified accountant can break it all down for you and ensure you aren’t paying more tax than you owe (no one wants that!).

One way they’ll do this is by checking you’re offsetting any costs associated with acquiring, improving, or disposing of the asset against your tax bill.

Remember to bear in mind that every business is unique and has its own challenges, and this is why it can be helpful to get some expert advice on what you need to do.

Do I need a specialist accountant?

The reality is that most accountants are familiar with CGT and able to offer advice on it. If your Capital Gains are particularly complicated or they involve an usual type of asset (such as crypto) then you might try and find one who specialises in that area if it gives you extra peace of mind.

 
Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

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What is MTD?

In simple terms, it’s a government-led initiative to try and modernise the tax system, while also minimising mistakes in the process.

It’s arguably the biggest change since HMRC launched Self Assessment more than 30 years ago. Okay, but… how does it work?

Well, it aims to replace existing analogue processes with digital, or cloud-based, record keeping, the idea being that this will ultimately make it easier for people to submit their tax returns.

Some of the other proposed benefits include:

• The ability to review all your tax information from your personal digital tax account
• A faster, more streamlined process of submitting your information to HMRC
• Increased accuracy and fewer errors

Who does MTD apply to?

It currently applies to two taxes: VAT and Income Tax, but it’s not difficult to see which way the wind is blowing, and it’s likely that more taxes will be “made digital” in the future.

Making Tax Digital for VAT

Compliance with the Making Tax Digital rules is mandatory for every business which registers for VAT.

Now, how exactly do you comply?

By keeping digital records, and using compatible Making Tax Digital software to submit your VAT returns.

Making Tax Digital for Income Tax

If you’re a sole trader or landlord, this may apply to you – depending on exactly how much you earn.

Those who earn above £50,000 from self-employment and/or property will need to comply with the MTD IT rules from April 2026, followed by those earning more than £30,000 in April 2027.

The trend then continues into 2028, which is when those earning £20,000 or more will need to start complying.

In order to meet the requirements, you need to digitise all records relating to business income and expenditure, and make this a habit moving forwards.

You also need to submit quarterly updates using HMRC-recognised software and provide a Final Declaration by 31st January (following the tax year it relates to).

How do I prepare my business for MTD?

To reiterate, Making Tax Digital is being rolled out in stages, and so it will ultimately depend on the type of tax return you’re required to submit.

Generally speaking, though, you’ll need to start keeping digital records and submitting your tax information to HMRC with the use of specially designed (and approved) accounting software.

In some cases you may have to use bridging software to make the actual submission. Bridging software is basically just a means by which you can link your financial records to HMRC in a way that’s compliant with the MTD rules.

After all, not all digital record-keeping systems (such as spreadsheets, and even some bookkeeping software providers) include a direct connection to HMRC, and so you may need a way to “bridge” the gap.

What is MTD software?

MTD accounting software allows you to create digital records and make submissions to HMRC. Lots of software providers offer an all-in-one solution which can be used to both create the records and submit them. This type of software is often hosted online in “the cloud”, with data stored on several servers in multiple locations, meaning it’s protected from things like power outages, or hardware and software malfunctions.

Will my accountant make sure I’m MTD compliant?

Online accounting software means you can give multiple people access to your data, simultaneously and in real time. This means your accountant and anyone else in your business is always kept in the loop and knows what’s what.

This in turn makes it easier for them to help you maintain good and accurate bookkeeping records, as there’s no need to transfer files manually. Everyone is always working on the most up-to-date versions of things, which helps in terms of collaboration.

So, yes, your accountant can absolutely help make sure you’re complying with the Making Tax Digital rules (if you’re someone who already needs to comply).

If you’re someone who submits a Self Assessment to report sole trader or landlord income, your accountant will be able to get you and your accounts ready for when you need to start complying, which of course depends on your turnover.

What about everyone else?

Well, it’s always a good idea to be prepared, and as it looks like Making Tax Digital is the future, you might want to consider starting the process of digitising your records now – even if the MTD rules aren’t yet directly applicable to you.

That way, you’ll be ahead of the curve and won’t have to scramble to digitise your records at some unknown point down the line.

What are some other benefits of digital record keeping?

We’ve established that online accounting software provides an extra layer of security, with your data being hosted on multiple servers in multiple locations at any one time, but what are some other benefits to using it?

Well, one of these would undoubtedly be increased collaboration, as every change is universal and real-time data can be seen by anyone with access.

Your data is also generally more accessible, with you being able to view it from anywhere with a secure login and access to the internet.

 
Find more help in our online accounting hub, and learn more about how to find the right accountant for your business.

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