Making Tax Digital (MTD) is HMRC’s initiative to digitise the UK’s tax system, making it easier for taxpayers to manage their obligations while reducing administrative errors. It requires businesses and individuals to keep digital records and submit updates using compatible software, rather than relying on paper-based methods.
MTD is therefore part of the UK government’s effort to create a more modern, digital-first tax system. It shifts the work of tax reporting from manual processes to digital tools, where records are stored electronically and submissions are made via software that connects directly to HMRC’s systems.
The core idea is to automate much of the tax process, helping to close the “tax gap” caused by errors or underreporting. It’s not a new tax but a change in how existing taxes are handled.
While it promises efficiency gains, some evidence suggests mixed results in practice, with benefits like fewer errors not always realised for all users. MTD has been rolled out in phases, starting with VAT, and plans for Income Tax are underway, but Corporation Tax extensions were canceled in 2025.
Find out more from https://sovos.com/vat/tax-rules/uk-making-tax-digital/
Class 1A National Insurance Contributions (NIC) are payable solely by employers, not employees, and apply only to certain taxable benefits in kind provided to employees through direct employment. For the 2025/26 tax year (6 April 2025 to 5 April 2026), focusing exclusively on direct employment income-related benefits (e.g., company cars, fuel, private medical insurance, accommodation, but excluding cash payments or non-benefit income), an employer is liable if the following criteria are met:
Provision of Taxable Benefits: The employer must provide benefits that are taxable on the employee under Income Tax rules, such as most expenses and benefits not exempted (e.g., non-cash vouchers, credit tokens, living accommodation, or assets transferred). Liability does not apply to benefits that are exempt (e.g., certain pensions advice or trivial benefits under £50).
Employment Relationship: The benefits must be provided to an employee (including directors) or their family/household due to the employment. This excludes self-employed individuals or non-employees.
No Employee Contribution Required: Employees do not pay or report Class 1A NIC; it’s an employer obligation calculated on the cash equivalent value of the benefit (as reported on form P11D).
UK Tax Jurisdiction: The employer must be UK-based or have UK employees, with benefits treated as UK-sourced. Special rules apply for cross-border work.
If these criteria are satisfied, the employer pays Class 1A NIC at a flat rate of 15% on the taxable value of the benefits. Payment is due annually by 22 July 2026 (electronic) or 19 July 2026 (postal) following the tax year, via form P11D(b). Employees may see these benefits affect their Income Tax via PAYE or Self-Assessment, but not NIC directly.
Class 1A National Insurance Contributions (NIC) are payable solely by employers, not employees, and apply only to certain taxable benefits in kind provided to employees through direct employment. For the 2025/26 tax year (6 April 2025 to 5 April 2026), focusing exclusively on direct employment income-related benefits (e.g., company cars, fuel, private medical insurance, accommodation, but excluding cash payments or non-benefit income), an employer is liable if the following criteria are met:
Provision of Taxable Benefits: The employer must provide benefits that are taxable on the employee under Income Tax rules, such as most expenses and benefits not exempted (e.g., non-cash vouchers, credit tokens, living accommodation, or assets transferred). Liability does not apply to benefits that are exempt (e.g., certain pensions advice or trivial benefits under £50).
Employment Relationship: The benefits must be provided to an employee (including directors) or their family/household due to the employment. This excludes self-employed individuals or non-employees.
No Employee Contribution Required: Employees do not pay or report Class 1A NIC; it’s an employer obligation calculated on the cash equivalent value of the benefit (as reported on form P11D).
UK Tax Jurisdiction: The employer must be UK-based or have UK employees, with benefits treated as UK-sourced. Special rules apply for cross-border work.
If these criteria are satisfied, the employer pays Class 1A NIC at a flat rate of 15% on the taxable value of the benefits. Payment is due annually by 22 July 2026 (electronic) or 19 July 2026 (postal) following the tax year, via form P11D(b). Employees may see these benefits affect their Income Tax via PAYE or Self-Assessment, but not NIC directly.
Information to Enter in Each Relevant Box on the Tax Return
Employees do not report Class 1A NIC directly on their Self-Assessment tax return, as it’s an employer payment. Instead, the SA102 (Employment supplementary page) requires details of benefits that trigger Class 1A, if not payrolled or adjusted via PAYE. Use a separate SA102 per employment. Below are the relevant boxes on SA102 where benefit information must be entered (other boxes like pay/tax are for core income; Class 1A is not input but derived from these):
Box 9: Company cars and vans – Enter the cash equivalent value (from P11D box 9, if not payrolled). This attracts Class 1A at 15% for the employer.
Box 10: Fuel for company cars and vans – Enter the cash equivalent or amount foregone (from P11D box 10, if not payrolled).
Box 11: Private medical and dental insurance – Enter the value (from P11D box 11, if not payrolled).
Box 12: Vouchers, credit cards and excess mileage allowance – Enter values (from P11D box 12, if not payrolled; e.g., non-exempt vouchers).
Box 13: Goods and other assets provided by your employer – Enter market value (from P11D box 13, if not payrolled).
Box 14: Accommodation provided by your employer – Enter cash equivalent (from P11D box 14, if not payrolled).
Box 15: Other benefits (including interest-free and low interest loans) – Enter total value (from P11D box 15, if not payrolled; e.g., loans over £10,000).
Box 16: Expenses payments received and balancing charges – Enter amounts (from P11D box 16, if not payrolled; may include reimbursed expenses treated as benefits).
HMRC calculates Income Tax on these for the employee and uses P11D data for employer Class 1A. If payrolled, these boxes may be zero or adjusted.
Checklist of Documents, Evidences, Receipts, Invoices, and Forms
Based solely on the referenced HMRC documents for employment income in Self-Assessment:
Furnished Holiday Lettings (FHL) referred to a specific category of short-term rental properties in the UK or European Economic Area (EEA) that qualified for advantageous tax treatment under UK tax rules. These were commercially let, fully furnished holiday accommodations, such as cottages, apartments, or houses, intended for short-term stays by tourists or visitors. The regime was designed to support the holiday letting sector by treating FHL income more like trading income in certain respects, rather than standard rental income. However, as of 6 April 2025 (for Income Tax) and 1 April 2025 (for Corporation Tax), the FHL regime has been abolished, meaning these properties are now taxed under the same rules as other residential or property rentals.
The rules outlined below primarily apply to the 2024-25 tax year (6 April 2024 to 5 April 2025), the last year the regime was in effect. For tax years starting from April 2025 onward, including the current 2025-26 tax year, FHL properties are integrated into a taxpayer’s general UK or overseas property business.
Qualifying Criteria To qualify as an FHL in the 2024-25 tax year, a property had to meet strict conditions:
Location: The property must have been in the UK or EEA (including Iceland, Liechtenstein, and Norway). UK and EEA FHLs were treated as separate businesses for tax purposes.
Furnishing: It needed to be fully furnished with sufficient items (e.g., beds, tables, kitchen equipment) for normal occupation, and tenants must have been entitled to use them.
Commercial Intent: The letting must have been on a commercial basis with the aim of making a profit. Even if no profit was made (e.g., due to off-season lettings to cover costs), it could still qualify if the intent was commercial.
Occupancy Thresholds (all three must be met in the tax year):
Availability Threshold: The property must have been available for commercial holiday letting to the public for at least 210 days (excluding days of personal use by the owner).
Letting Threshold: It must have been actually let as holiday accommodation for at least 105 days (excluding longer-term lets over 31 continuous days, or lets to friends/family at reduced or zero rates).
Pattern of Occupation Threshold: The total period of longer-term lets (over 31 continuous days) must not have exceeded 155 days.
Elections for Flexibility:
Averaging Election: If you had multiple properties, you could average the letting days across them to meet the 105-day threshold (deadline: 31 January 2027 for 2024-25).
Period of Grace Election: Allowed up to two consecutive years of grace if you genuinely intended to meet the letting threshold but failed (e.g., due to unforeseen circumstances), provided it qualified in the prior year.
Apportionment: If the property was only partly used for FHL or had private use, income and expenses were apportioned accordingly.
Properties like caravans or houseboats could qualify if they met the criteria. All UK FHLs were combined into one business, and all EEA FHLs into another, with no offsetting of losses between them.
If a property ceased to qualify (e.g., due to sale, private use, or failing thresholds), the special treatment ended, potentially triggering balancing allowances or charges on capital assets.
Tax Advantages and Rules Under the FHL Regime
The FHL regime provided several benefits not available to standard buy-to-let properties, treating the income more favorably:
Income Tax Treatment:
Profits were calculated separately from other property income.
Full deduction of loan interest and finance costs (no restriction to basic rate, unlike non-FHL residential lets).
Losses could only be carried forward and offset against future FHL profits in the same business (UK or EEA).
Capital Allowances: You could claim plant and machinery allowances for items like furniture, fixtures, equipment, and vehicles (e.g., 100% first-year allowances for zero-emission cars or electric charge-points). Balancing charges applied on disposals if proceeds exceeded the tax value.
Capital Gains Tax (CGT) Reliefs: Treated as a trading business, qualifying for:
Business Asset Disposal Relief (BADR) – reduced CGT rate to 10%.
Rollover Relief – defer CGT on gains reinvested in new assets.
Gift Relief – defer CGT on gifts of business assets.
Relief for loans to traders.
Exemptions for disposals by companies with substantial shareholdings.
Pension Contributions: FHL profits counted as “relevant UK earnings” for calculating maximum pension relief.
Other Rules:
Cash basis or traditional accounting could be used (consistent with other property income).
Property Income Allowance (up to £1,000) was available if total property income exceeded £1,000, but claiming it meant no expense deductions.
Non-resident landlords reported gross income and claimed back tax deducted under the scheme.
These advantages were intended to encourage investment in holiday accommodations but were seen as distorting the property market.
Reporting in Tax Returns
For the 2024-25 tax year:
Use the “UK Property” pages (SA105) of the Self Assessment tax return.
Report FHL income separately (e.g., Box 5 for total income, Boxes 6-12 for expenses like repairs, loan interest, professional fees, and capital allowances).
Copy profits to the main tax return (e.g., as non-savings income in tax calculation).
Elections (averaging or period of grace) were made via the return or separately by the deadline.
If using the tax calculation summary (SA110), FHL fed into non-savings income sections.
Deadlines: Paper returns by 31 October 2025; online by 31 January 2026.
Abolition of the Regime and Current Status
The FHL regime was abolished to create a fairer tax system by removing tax advantages for holiday let owners compared to other landlords. It was announced in the Spring Budget 2024 and took effect from 6 April 2025 for Income Tax (and 1 April 2025 for Corporation Tax).
Reasons: The regime, introduced in 1984, gave undue benefits in finance costs, capital allowances, CGT reliefs, and pension contributions, potentially distorting the housing market (e.g., favoring short-term holiday lets over long-term rentals).
Impacts:
All former FHL properties are now part of your general UK or overseas property business.
Finance costs (e.g., loan interest) are restricted to basic rate relief for residential properties.
No access to trader-style CGT reliefs (e.g., no BADR at 10%; standard CGT rates apply: 18%/24% for residential property gains).
Profits no longer count as earnings for pension relief.
Simplified reporting: No separate FHL calculations, potentially reducing admin burden.
Transitional Arrangements:
Losses: Existing FHL losses can be carried forward and offset against future general property business profits (broader than before).
Capital Allowances: Continue writing-down allowances on existing pools; new expenditure (from April 2025) qualifies for “replacement of domestic items relief” instead (deduction for replacing furnishings, no initial purchases).
CGT Reliefs: If a business ceased before abolition and met FHL conditions, reliefs like BADR may still apply to disposals within 3 years post-cessation. Pre-abolition relief claims are not disturbed.
Anti-Forestalling Measures: From 6 March 2024, rules prevent exploiting the regime via unconditional contracts (e.g., artificial transfers to crystallize gains under old CGT reliefs).
Post-Abolition Treatment: Income and gains are reported as standard property income. For 2025-26 onward, use the same boxes in SA105 but without FHL separation. Expect higher tax bills for many owners due to lost reliefs.
Guidance and Further Info: See HMRC’s policy paper for details. Contact HMRC at robert.nott@hmrc.gov.uk or 03000 537413. No formal consultation occurred; impacts were assessed in Budget documents.
If you’re dealing with a property in the 2024-25 tax year, refer to the old rules for your return. For current or future years, consult a tax adviser, as the changes could affect profitability—e.g., higher CGT on sales or restricted interest deductions.
Where UK property is a source of rental or other income, the taxpayer is liable for self-assessment (i.e., must file a tax return) if their situation meets any of the following criteria:
Total property income exceeds £1,000: This includes all UK rental income, receipts from land or property, furnished holiday lettings (FHL) in the UK or EEA (unless remittance basis applies), furnished rooms in your home, lease premiums, or reverse premiums. Income up to £1,000 qualifies for the property income allowance and is exempt from tax and reporting. If over £1,000, you must report it unless you qualify for an exemption (e.g., Rent a Room relief up to £7,500/£3,750 if joint).
Claiming the property income allowance but income exceeds £1,000: You must file to claim the allowance (up to £1,000 total across all property businesses, including foreign). You cannot claim if income is from a connected party (e.g., relative or employer).
Claiming Rent a Room relief where income exceeds £7,500 (£3,750 if joint): If letting furnished rooms in your home and income exceeds the threshold, you must file and either pay tax on the excess or calculate profit after expenses.
Non-resident landlord status: Even if income is below thresholds, you must file if claiming back tax deducted under the non-resident landlord scheme.
Claiming reliefs, allowances, or losses: This includes:
Deducting allowable expenses or capital allowances (e.g., if expenses > turnover, to claim losses against future income).
Foreign Tax Credit Relief on EEA FHL foreign tax.
Relief for finance costs on residential properties.
Carrying forward losses from prior years.
Capital allowances (e.g., Annual Investment Allowance, Structures and Buildings Allowance).
Period of grace election for FHL properties not meeting qualification days.
Property business involves partnerships or joint ownership: If property is let jointly and you need to declare your share (or use Form 17 for unequal shares), or if income is from a partnership property business.
Accounting period changes or transitional adjustments: If switching between cash basis and traditional accounting, requiring adjustments for transitional receipts/expenses.
Participation in Managing Serious Defaulters (MSD) programme: Requires full reporting, including profit/loss accounts and balance sheets.
Income from specific sources requiring separation: E.g., FHL must be separated for special rules (capital allowances, reliefs); EEA FHL if not on remittance basis.
No expectation of future income but cessation in year: If all property income ceased and no future income expected, you may still need to file to confirm.
If you believe you do not need to file (e.g., income ≤ £1,000 or fully exempt under allowances), you must notify HMRC by 31 January 2026 to avoid penalties. Use the online checker at www.gov.uk/check-if-you-need-a-tax-return. Filing deadlines: Paper return by 31 October 2025; online by 31 January 2026.
Note: These criteria assume no other income sources (e.g., employment, self-employment). If other income exists, broader self-assessment rules apply. Property income from overseas (non-EEA FHL) goes in the ‘Foreign’ pages, but total property income (UK + foreign) determines allowance thresholds.
Information Required for Each Box in the Tax Return (UK Property Pages – SA105)
The UK property pages (SA105) are the specific section of the tax return for reporting UK property income. The boxes are divided into UK FHL (furnished holiday lettings) and other UK property income. You must complete relevant boxes based on your income type. If only UK property income triggers self-assessment, focus on these; copy figures to main return (e.g., TR3) as needed. All figures are in £ (pounds sterling), rounded to nearest pound; negative figures (losses) are entered without minus sign where specified.
Always include your full name and Unique Taxpayer Reference (UTR) at the top.
UK Property Details (Applies to All)
Box 3: Put ‘X’ if any income is from property let jointly (e.g., with spouse/partner). Only report your share of income/expenses; use Form 17 if unequal shares.
Box 4: Put ‘X’ if claiming Rent a Room relief and total rents ≤ £7,500 (£3,750 if joint). No need to complete rest if this is your only letting income.
Furnished Holiday Lettings (FHL) in UK or EEA
Complete if property qualifies (available 210+ days, let 105+ days as holiday accommodation).
Box 5: Total income from all FHL (including services to tenants; gross if non-resident). Use cash basis receipts if applicable.
Box 5.1: Amount of property income allowance claimed (≤ £1,000 total across all properties; cannot exceed income or claim expenses/allowances).
Box 5.2: Put ‘X’ if using traditional accounting (not cash basis). Must match basis for other UK property.
If property income is from a partnership, use ‘Partnership (full)’ pages instead. For tax calculation (SA110), property income feeds into non-savings income (e.g., A28/A29 for profits, M1/M2 for finance costs relief), but these are not direct tax return boxes for property.
Checklist of Documents, Evidence, Receipts, Dates, Invoices, and Forms Needed
To submit a tax return for UK property income, maintain records for 5-6 years (22 months if no enquiry). Here’s a comprehensive checklist based on SA105 and SA110 notes:
Keep digital/physical copies; HMRC may request during enquiries. If no records for figures, declare in return. Consult adviser if complex (e.g., cash basis switch)
Transition profits (also called “transition part profits”) arise from the UK government’s Basis Period Reform, which changed how self-employed individuals and partners in partnerships calculate their taxable profits for Income Tax. Before the reform, businesses could base their taxable profits on accounting periods that didn’t align with the UK tax year (6 April to 5 April). The reform mandates that, from the 2024-25 tax year onward, all unincorporated businesses (sole traders and partnerships) must use a “tax year basis” for taxing profits—meaning profits are taxed based on what arises in the tax year itself, regardless of the accounting date.
The 2023-24 tax year was the “transitional year” where businesses with non-aligned accounting dates had an extended basis period (potentially longer than 12 months). This extension created “transition profits”: the extra profits in the extended period that wouldn’t have been taxed under the old rules. These profits are taxed separately over multiple years to spread the burden.
Eligibility
Applies to self-employed sole traders and partners in partnerships (including LLPs) who:
Started their business or joined the partnership before 6 April 2023.
Had an accounting year-end date not falling on or between 31 March and 5 April (i.e., not aligned with the tax year).
Does not apply if:
Your accounting date was already aligned.
You started business after 5 April 2023.
It’s non-trading income (e.g., property or investment income in partnerships).
For partnerships: Only trading or professional profits are affected. Each partner’s share is calculated individually based on the Partnership Statement from the partnership’s tax return (SA850). If you joined before 6 April 2022, you’re likely affected.
If you’re unsure, check HMRC Helpsheet HS222 (“How to calculate your taxable profits”) or use HMRC’s online transition profit calculator (not available for complex cases like multiple accounting periods or partnerships with non-trading income).
Step-by-Step Calculation of Transition Profits
Transition profits are calculated once in the 2023-24 tax year (the transitional year). You don’t recalculate them annually; you just spread the remaining amount. Use Working Sheet 3 from HS222 or the HMRC guidance for this.
Identify the Basis Period for 2023-24:
The basis period runs from the day after your 2022-23 basis period ended until 5 April 2024 (or your accounting date in 2023-24 if it’s between 31 March and 4 April 2024).
Split into:
Standard part: The first 12 months (equivalent to a normal basis period).
Transition part: The remaining period after the standard part, up to 5 April 2024 (this creates the “extra” profits).
Apportion Profits from Your Accounts:
Use your business accounts that overlap the standard and transition parts.
Apportion profits proportionally:
By days (recommended for accuracy): Profit in part = Total accounting period profit × (Days in part ÷ Total days in accounting period).
Include leap day (29 February 2024) if applicable.
By months or weeks: If days are impractical, but must be consistent.
Adjust for allowable expenses, capital allowances, and other tax adjustments (e.g., private use) as normal.
For partnerships: Use the partnership’s overall profits, then apply your profit-sharing ratio to get your share.
Calculate Gross Transition Profits:
Sum the apportioned profits for the transition part.
Deduct any losses from the standard part (these offset the transition profits first).
Deduct Overlap Relief:
Overlap relief is any previously “doubled-up” profits from earlier years (e.g., when you started business or changed accounting dates).
Deduct it fully from the transition profits (it can’t be carried forward beyond 2023-24).
If unknown, estimate provisionally and amend your return later.
Formula: Transition profits = (Apportioned transition part profits – Standard part losses) – Overlap relief.
If this results in a negative (loss), no transition profits arise, and the loss can be carried forward as usual.
Example Calculation (from HMRC Guidance)
Your accounting period: 1 October 2022 to 30 September 2023 (profit £45,000); 1 October 2023 to 30 September 2024 (profit £75,000).
Standard part: 1 October 2022 to 30 September 2023 = £45,000 (all from first accounts).
Transition part: 1 October 2023 to 5 April 2024 (188 days out of 366 in second accounts) = £75,000 × (188 ÷ 366) ≈ £38,525.
Assume overlap relief: £10,000.
No standard losses.
Transition profits = £38,525 – £10,000 = £28,525.
For a partnership: If your share is 50%, your transition profits = £14,262.50.
Another example (monthly apportionment):
Accounts: 1 January 2023 to 31 December 2023 (£50,000 profit); 1 January 2024 to 31 December 2024 (£15,000 profit).
Standard part: Full first accounts = £50,000.
Transition part: 1 January 2024 to 5 April 2024 (3/12 months) = £15,000 × (3 ÷ 12) = £3,750.
Overlap relief: £1,000.
Transition profits = £3,750 – £1,000 = £2,750.
Spreading Transition Profits for Taxation
Total transition profits are spread over 5 tax years (2023-24 to 2027-28) to avoid a large one-off tax bill.
Minimum in 2023-24: At least 20% of the total transition profits (after losses and overlap relief).
Remaining amount: Spread equally over the next 4 years (2024-25 to 2027-28), i.e., one-quarter of the remaining each year.
If no acceleration in 2023-24: 20% in 2023-24, then 20% of original each subsequent year (since remaining 80% ÷ 4 = 20%).
HMRC phrases it as “25% of the remaining transition profits” for 2024-25 onward, but this means one-quarter of the untaxed remainder at that point (ensuring equal spread).
If the business ceases before 2027-28, the full remaining amount is taxed in the cessation year.
For partnerships: Report your share in Box 16.3 (SA104F full pages) or equivalent. Do not include in Box 9 (basis period adjustment).
Losses: Brought-forward losses from earlier years can offset the spread amount each year (up to the spread for that year—Box 16.4 in SA104F). Current-year losses cannot offset transition profits.
Averaging (e.g., for farmers/artists): Transition profits are excluded from averaging claims.
Acceleration Options
You can elect to accelerate taxation of more than the minimum in any year (e.g., to use allowances or lower tax rates).
How: Enter the higher amount (e.g., standard spread + accelerated) in Box 16.3 (partnerships) or equivalent on your Self Assessment return. Provide full details (including accelerated amount) in the “Any other information” box (page TR 7).
This reduces the spread in future years proportionally.
No reversal once elected.
Mandatory acceleration if business ceases early.
For 2024-25 Specifically
This is the second year of spreading.
Enter 25% of the remaining untaxed transition profits (after 2023-24 amount) in Box 16.3 (SA104F) or calculate via HS222 Working Sheet.
If you accelerated in 2023-24, adjust the remaining downward.
Partnerships: Use the latest Partnership Statement; if multiple, adjust in Box 9 but exclude transition profits there.
If no transition profits were taxed in 2023-24 (e.g., due to losses), spread the full amount over 4 years at 25% each.
How Transition Profits Affect Your Overall Tax Calculation
From the Tax Calculation Summary (SA110 notes):
Transition profits are added to your non-savings income (e.g., Box A43 in the working sheet) as a separate charge.
To calculate the tax due on them:
Run the full tax calculation worksheet (Sections 1-12) with the transition amount included in non-savings income (up to Box A240—total tax due).
Run it again without the transition amount (get a second A240 figure).
The difference between the two A240 figures is the tax due on the transition profits.
This ensures the tax is calculated at your marginal rate, after allowances and other income.
Copy to the relevant boxes on SA110 and add to your total tax liability.
Key Tips and Resources
Keep records of your calculation, spread amounts, and elections for future returns (amendable up to 12 months after filing).
Provisional figures: Allowed if disputing or estimating (e.g., overlap); mark on return and amend by 31 January 2027 for 2024-25.
Penalties: Inaccurate reporting can lead to penalties (30-100% of tax due).
Further help: HMRC Helpsheet HS222 (includes Working Sheets); HS227 for losses. Search gov.uk for “basis period reform” or use the online calculator. For partnerships, refer to SA104F/S notes and SA850 guidance.
If complex (e.g., multiple periods), consult a tax advisor—HMRC won’t calculate for you if you miss deadlines (paper by 31 Oct 2025; online by 31 Jan 2026 for 2024-25).
A taxpayer must file a Self-Assessment (SA) tax return if they are a partner in a partnership and meet any of the following criteria related to partnership income:
Income from Partnership: If you receive any share of partnership profits (taxable or otherwise), you must report it on your personal tax return. This includes trading or professional profits, losses, or other income allocated to you via the Partnership Statement. Even if the partnership files its own return (SA850), each partner is individually liable for reporting their share.
New or Changed Partnership Status: If you became a partner between 6 April 2024 and 5 April 2025, you must register for Self-Assessment and Class 2 National Insurance Contributions (NICs) immediately (via www.gov.uk/register-for-self-assessment/self-employed). If you left a partnership in this period, you must notify HMRC to avoid overpaying tax and ensure correct NICs (via www.gov.uk/stop-being-self-employed).
Taxable Profits or Losses: You are liable if your share of partnership profits exceeds £1,000 (general untaxed income threshold), or if you have losses to claim relief on (e.g., set off against other income). Losses can be claimed up to £50,000 or 25% of adjusted total income per year.
Foreign Tax or Adjustments: If claiming foreign tax as a deduction or Foreign Tax Credit Relief (HS263), or if adjustments are needed (e.g., for basis period reform, averaging, or change in accounting practice).
Transition Profits from Basis Period Reform: If affected by reforms in 2023-2024 (e.g., became a partner before 6 April 2022), remaining transition profits (spread over 4 years at 25% each, or accelerated) must be reported, triggering SA liability.
General SA Triggers: Beyond partnership-specific, if partnership income pushes total income over £100,000 (reducing Personal Allowance), or if you have untaxed income, capital gains, or other factors requiring SA (e.g., High Income Child Benefit Charge).
Penalties for Non-Compliance: Failure to register or file can result in penalties (e.g., £100 fixed, plus daily £10 after 3 months, up to £300 after 6/12 months per partner). Deliberate errors can lead to penalties up to 100-200% of tax due, or prosecution.
If your only income is from a partnership and below thresholds (e.g., no tax due), you may still need to file if registered or if HMRC issues a notice. Always check via HMRC helpline or online account.
Differences Between Kinds of Partnerships
This post primarily cover general UK partnerships but highlight differences:
General UK Partnerships: Treated as transparent for tax; profits/losses flow to partners’ personal returns. Use partnership’s tax reference in Box 1 (SA104S/F). Partners pay tax on their share individually. Includes trading/professional businesses.
Foreign Partnerships: Use your own Unique Taxpayer Reference (UTR) in Box 1 instead of the partnership’s. May involve foreign tax claims (Box 12). Subject to same rules but with potential double taxation relief.
Limited Partnerships or LLPs (Limited Liability Partnerships): Not explicitly differentiated in notes, but treated similarly for tax (transparent). However, LLPs are bodies corporate; members may have salaried elements (reported as employment income). Losses may be restricted if limited liability applies.
EEIGs (European Economic Interest Groupings): Special rules in SA850: If UK-registered, manager files; otherwise, addressed member files. Similar to partnerships but for cross-border EU activities. Penalties apply per member.
Investment vs. Trading Partnerships: Notes focus on trading/professional profits; investment partnerships (e.g., property) use same forms but may require ‘Property’ pages if not covered in partnership return.
Nominee or Corporate Partners: If partnership includes a company, filing deadline extends (SA850). Individual partners still file personally.
Short vs. Full Pages: Not a partnership type difference, but form choice: Use SA104S (short) for simpler cases (e.g., no complex adjustments); SA104F (full) for detailed ones (e.g., transition profits, detailed expenses).
All types require the partnership to file SA850 (Partnership Tax Return) by 31 October 2025 (paper) or 31 January 2026 (online), providing each partner with a Partnership Statement for their personal return.
Information Required in Every Box for the Tax Return (Partnership-Related Sections)
Assuming income only from partnership, focus on SA104S (Short) or SA104F (Full) supplementary pages in your personal SA100 tax return. Use short if simple (e.g., no detailed adjustments); full otherwise. Do not use if changing between self-employment and partnership mid-year—use self-employment pages instead. Copy figures from Partnership Statement (provided by partnership via SA850). If printed form, add name and UTR at top.
SA104S (Partnership Short Pages) Boxes:
Box 1 (Partnership reference number): Partnership’s tax reference (from Partnership Statement). For foreign partnership, your own UTR.
Box 3 (Date joined if after 5 April 2024): DD MM YYYY you became partner (6 April 2024–5 April 2025). Register for SA/NICs if new.
Box 4 (Date left if before 6 April 2025): DD MM YYYY you left. Notify HMRC for tax/NICs adjustment.
Box 8 (Share of profit/loss): Figure from Box 11/12 of Partnership Statement (latest if multiple). Use minus sign for loss.
Box 9 (Adjustment for non-12-month period or end before 31 March 2025): Any addition/apportionment to align with tax year (e.g., add/apportion shares from statements).
Box 10 (Adjustment for change of accounting practice): From Box 11A of Statement (spread over 6 years; elect to accelerate).
Box 11 (Averaging adjustment): Change from averaging claim (minus if reduces profit). See HS224 (farmers) or HS234 (artists).
Box 12 (Foreign tax as deduction): Foreign tax paid (if not claiming Foreign Tax Credit Relief—HS263).
Box 16 (Adjusted profit for 2024-25): From working sheet on SPN 4 (profit after adjustments; 0 if loss).
Box 17 (Losses brought forward set off): Losses from earlier years (up to Box 16 amount).
Box 18 (Taxable profits after losses): From working sheet Box K on SPN 4.
Box 19 (Other business income not in accounts): Personal professional income (not partnership’s).
Box 20 (Share of total taxable profits): From working sheet Box M on SPN 4.
Box 21 (Adjusted loss for 2024-25): From working sheet on SPN 4 (if loss).
Box 22 (Loss this year set off against other income): Current-year loss (limited to £50,000 or 25% adjusted income).
Boxes 23–24 (Other loss relief claims): Details in ‘Any other information’ on TR7 if claimed early.
SA104F (Partnership Full Pages) Boxes:
Similar to short but more detailed. Use if complex (e.g., transition profits).
Box 1: Same as short.
Box 3: Same as short.
Box 4: Same as short.
Box 8 (Share of profit/loss): Same as short Box 8.
Box 9 (Basis period adjustment): Adjustments for non-standard periods (do not include transition profits).
Box 10: Same as short.
Box 11: Same as short.
Box 12: Same as short.
Box 16 (Adjusted profit): From working sheet on FPN 8 (0 if loss).
Box 16.3 (Spread of transition profit): 25% of remaining transition profits (or accelerated amount). Details in TR7 if electing acceleration.
Box 16.4 (Losses brought forward vs. transition profit): Up to Box 16.3 amount.
Box 17–20: Similar to short (losses brought forward, taxable profits, other income, total share).
Box 21: Same as short.
Box 22: Same as short.
Other Boxes (15–76): Use self-employment full pages for detailed profit/loss calc if needed (e.g., expenses, capital allowances).
Tax Calculation Summary (SA110) – Relevant if Partnership Income Triggers Tax Due:
If partnership income requires calculation (e.g., >£100,000 or transition profits), use SA110 working sheet. Key boxes (copy from partnership pages):
Non-savings income (Section 1): Include partnership profits/lump sums.
Deductions/Allowances (Section 4): Personal Allowance (reduced if income >£100,000—Section 13).
Taxable Income (Section 5): After allowances.
Tax Due (Sections 7–8): On profits (e.g., 20%/40%/45% bands).
NICs (Section 15): Class 2/4 on partnership profits.
Transition Profit Charge: Calculate twice (with/without in A43) for separate charge.
Provisional figures: Use if disputing; mark ‘X’ in TR8 Box 20 and explain in TR7.
Checklist of Documents, Evidences, Receipts, Dates, Invoices, and Forms Needed to Submit a Tax Return Correctly
To file accurately (online/paper by deadlines), gather:
Partnership Statement(s): From partnership’s SA850 (summary of your share; multiple if periods overlap).
UTR and Name Confirmation: Your UTR (10 digits); partnership’s tax reference.
Dates: Join/leave dates (DD MM YYYY); accounting period end dates.
Adjustment Evidence: Bank statements/receipts for non-12-month periods, averaging claims (HS224/HS234), change in accounting practice (spread calculations).
Loss Relief Claims: Prior-year loss records; details for set-off (in TR7 if early claim).
Foreign Tax Documents: Proof of foreign tax paid (e.g., withholding certificates) for Box 12 or HS263 claims.
Transition Profit Evidence: Calculations from 2023-2024 basis reform; election details for acceleration (in TR7).
Other Income Proof: Receipts for personal professional income (Box 19).
NICs/Registration Forms: Proof of registration if new partner.
Tax Return Forms: SA100 (main), SA104S/F (partnership pages), SA110 (if calculating tax), Additional Information pages (Ai) if losses/other.
Class 4 NICs are profit-based contributions for self-employed individuals (including sole traders, partners in business partnerships, or Lloyd’s underwriters). Unlike Class 2 NICs, which are flat-rate and primarily for benefit entitlement, Class 4 NICs are a percentage of your taxable profits and are collected alongside income tax through Self Assessment.
They do not directly build additional benefit entitlements but are mandatory where applicable. Below is a comprehensive summary based on HMRC guidance for the 2024-25 tax year (6 April 2024 to 5 April 2025). Note that rates were reduced from the previous year (2023-24), where the main rate was 9%, to simplify taxation for the self-employed as announced in the 2023 Autumn Statement and 2024 Spring Budget.
Key Rates and Thresholds for 2024-25
Main Rate: 6% on taxable profits between the Lower Profits Limit (LPL) and Upper Profits Limit (UPL).
Additional Rate: 2% on taxable profits above the UPL.
Lower Profits Limit (LPL): £12,570 (aligned with the Personal Allowance for income tax; no Class 4 due on profits below this).
Upper Profits Limit (UPL): £50,270 (aligned with the end of the basic rate income tax band).
No Liability Threshold: If profits are below £12,570, no Class 4 NICs are due. There is no equivalent to the Class 2 “small profits threshold” for opting in voluntarily—Class 4 is only payable on profits in the chargeable bands.
These thresholds and rates apply UK-wide (including Scotland). For 2025-26, the main rate remains 6%, with thresholds potentially adjusted for inflation, but this does not affect 2024-25 returns.
Maximum Contributions Test for National Insurance Contributions (NICs)
The Maximum Contributions Test (also known as the annual maximum for Class 4 NICs) is a mechanism to ensure that individuals who pay both Class 1 NICs (from employment) and Class 4 NICs (from self-employment) in the same tax year do not overpay compared to someone with equivalent earnings from a single source. It caps the total NICs liability based on Regulation 100 of the Social Security (Contributions) Regulations 2001. This test is particularly relevant if you have mixed income sources and is automatically applied during Self Assessment calculations (in Section 15 of the SA110 Tax Calculation Summary working sheet).
For the 2024-25 tax year, the test uses the reduced Class 4 main rate of 6% (down from 9% in 2023-24, as per the National Insurance Contributions (Reduction in Rates) Act 2024). There were no fundamental changes to the test’s structure for 2024-25 beyond updating the rates and thresholds. The key thresholds are: ower Profits Limit (LPL): £12,570
Upper Profits Limit (UPL): £50,270
Class 4 main rate: 6% (on profits between LPL and UPL)
Class 4 additional rate: 2% (on profits above UPL)
Class 2 weekly rate: £3.45 (used as 53 weeks in the max test for conservatism, totaling £182.85)
When Does the Test Apply?
You must have paid Class 1 NICs (employee contributions) in the year.
Your self-employment profits exceed the LPL (£12,570), making you liable for Class 4 NICs.
If no Class 1 NICs are paid, the test does not apply, and you pay standard Class 4 NICs.
Exemptions from Class 4 (e.g., under 16 or over State Pension age at the start of the tax year) mean no test is needed.
The test compares your “normal” Class 4 liability against a capped maximum and takes the lower amount. HMRC calculates this for you if you submit your return, but you can estimate it using the steps below or the SA110 working sheet.
Step-by-Step Calculation Method for 2024-25
Use your taxable self-employment profits (after expenses, allowances, and adjustments, as reported in Box 31 of SA103S or Box 76 of SA103F). Include any Class 2 NICs paid or treated as paid.
Calculate the main band: Subtract LPL from UPL (£50,270 – £12,570 = £37,700).
Apply main rate: Multiply the result by the main Class 4 rate (£37,700 × 6% = £2,262).
Add Class 2 element: Add 53 weeks of Class 2 NICs (£3.45 × 53 = £182.85). Total: £2,262 + £182.85 = £2,444.85.
Subtract paid contributions: Subtract the total of any Class 2 NICs paid/credited + Class 1 NICs paid at the main employee primary rate (8% on earnings between Primary Threshold £12,570 and Upper Earnings Limit £50,270). This gives “Step 4 result.”
If Step 4 is negative, treat it as nil (Case 3) and proceed to Step 5 (main Class 4 = £0).
If Step 4 > £0 but ≤ your “normal” main Class 4 + Class 1 main + Class 2, this is your max main Class 4 (Case 2); proceed to Step 5.
If Step 4 > £0 and > that aggregate, this is your total max Class 4; stop here (Case 1). (“Normal” main Class 4 = [min(profits, UPL) – LPL] × 6%, if positive.)
If Case 1 applies, your max Class 4 NICs = Step 4. Otherwise, continue:
Adjust for used band: Multiply Step 4 by (100 / main rate) = Step 4 × (100 / 6) ≈ Step 4 × 16.6667. This calculates the equivalent “band used” for the contributions already paid.
Available main band: Subtract LPL from the lesser of UPL or your actual profits.
Remaining band: Subtract Step 5 from Step 6. If negative, treat as nil.
Additional on remaining band: Multiply Step 7 by the additional rate (2%).
Additional on excess profits: Multiply profits above UPL by 2% (if profits > UPL; else £0).
Total max Class 4 NICs = Step 4 + Step 8 + Step 9.
Compare this max to your “normal” Class 4 liability ([profits – LPL] × 6% up to UPL, + 2% above) and pay the lower amount. Copy the final figure to Box A329 in the SA110 summary.
Example
Assume £60,000 self-employment profits, £20,000 employment earnings (all between PT and UEL, so Class 1 main paid: [£20,000 – £12,570] × 8% ≈ £594), and Class 2 treated as paid (£0 actual payment).
Normal Class 4: (£50,270 – £12,570) × 6% + (£60,000 – £50,270) × 2% = £2,262 + £194.60 = £2,456.60
Step 1: £37,700
Step 2: £2,262
Step 3: £2,262 + £182.85 = £2,444.85
Step 4: £2,444.85 – (£594 + £0) = £1,850.85
Since £1,850.85 > £0 and < normal aggregate (calculate similarly), Case 2.
Step 5: £1,850.85 × (100/6) ≈ £30,847.50
Step 6: min(£60,000, £50,270) – £12,570 = £37,700
Step 7: £37,700 – £30,847.50 = £6,852.50
Step 8: £6,852.50 × 2% = £137.05
Step 9: (£60,000 – £50,270) × 2% = £194.60
Max Class 4: £1,850.85 + £137.05 + £194.60 = £2,182.50
Pay the lower: £2,182.50 (saving ~£274 vs. normal).
This ensures your total NICs align with a single-source earner.
Additional Notes
Help: See HMRC’s NIM24175 manual for more or contact the Self Assessment helpline. If your return is complex, use a tax adviser. If profits are low or exempt, no Class 4 is due
53 vs. 52 Weeks: The test uses 53 weeks for Class 2 to provide a buffer, even though the year has 52 weeks.
Share Fishermen/Voluntary Class 2: Use £4.10/week for share fishermen. Voluntary Class 2 counts in Step 4.
If No Cap Needed: If max > normal Class 4, pay normal.
Reporting: Indicate adjustments in Self-Employment pages (e.g., Box 102 in full form). HMRC may notify you if deferment applies.
Class 2 NICs are flat-rate contributions primarily for self-employed people (including sole traders, partners in a business partnership, or Lloyd’s underwriters). They help build entitlement to certain contributory benefits, such as the State Pension, Maternity Allowance, and Bereavement Support Payment. Below is a comprehensive summary based on HMRC guidance for the 2024-25 tax year (6 April 2024 to 5 April 2025). Note that significant reforms took effect from April 2024: Class 2 NICs are no longer mandatory for most self-employed individuals but can be credited or paid voluntarily to protect your National Insurance record.
Key Rates and Thresholds for 2024-25
Rate: £3.45 per week (flat rate, not profit-based).
This equates to approximately £179.40 for a full tax year (based on 52 weeks; calculations may occasionally reference 53 weeks in maximum contribution tests, but standard is 52).
Small Profits Threshold (SPT): £6,725.
If your taxable profits (after allowable expenses and deductions) are £6,725 or more: Class 2 NICs are treated as paid automatically. You do not need to pay anything, but you still receive a qualifying year for benefits like the State Pension.
If your taxable profits are below £6,725 (or you make a loss): No Class 2 NICs are required, but you can choose to pay them voluntarily to gain a qualifying year and protect your entitlement to benefits.
No Upper Threshold: Unlike Class 4 NICs, Class 2 is not scaled by higher profits—it’s either credited (no payment) or voluntary (flat rate).
These thresholds and rates apply UK-wide (including Scotland). For 2025-26, the rate increases to £3.50 per week and the threshold to £6,845, but this does not affect 2024-25 returns.
Eligibility and Who Must/Should Pay
Mandatory Payment: None for 2024-25—reforms abolished compulsory Class 2 payments. If profits are £6,725 or above, contributions are credited without payment.
Voluntary Payment: Recommended if profits are below £6,725 and you want to maintain your National Insurance record for benefits. This is particularly important if you’re close to State Pension age or rely on contributory benefits. You must be registered as self-employed with HMRC for voluntary payments to count (even if not filing a tax return).
Special Cases:
Employed and Self-Employed: If you pay Class 1 NICs through employment, you may pay reduced or no Class 2, depending on your total contributions. However, you still need to pay Class 2 during temporary self-employment breaks if you intend to resume (e.g., writers’ block or seasonal work).
Foster Carers/Shared Lives Carers: Treated as self-employed; same rules apply based on qualifying care receipts.
Rent-a-Room Scheme Participants: If using this for income from letting furnished rooms, it counts as self-employment; apply thresholds to profits.
Overseas or Remittance Basis Users: If all business is abroad and on remittance basis, limited reporting; otherwise, full rules apply.
Exemptions/Exclusions: Certain groups (e.g., examiners, ministers of religion without salary, or property investors without active trading) may pay voluntary Class 2 outside Self Assessment. You cannot pay if under 16 or over State Pension age at the tax year start.
If you’re not eligible for crediting and don’t pay voluntarily, you won’t get a qualifying year, which could affect your State Pension (you need 35 qualifying years for the full new State Pension).
How Class 2 NICs Are Calculated and Paid
Calculation:
In your Self Assessment tax return (SA103S short form for turnover <£90,000 or SA103F full form otherwise), indicate voluntary payment by putting an ‘X’ in:
Box 36 (short form).
Box 100 (full form).
This triggers inclusion in your tax calculation (SA110). The flat rate (£3.45/week) is multiplied by the number of weeks in the tax year (typically 52, totaling ~£179.40).
If profits >=£6,725, no amount is due (shown as £0 in calculations).
Maximum Contributions Test: If your total NICs (Class 1 from employment + Class 2 + Class 4) exceed a cap (e.g., ~£5,000 for 2024-25, based on 53 weeks of maximum Class 1/4 rates), you may get a refund or reduction. This is rare but calculated in SA110 Section 15.
Payment:
Paid via Self Assessment alongside income tax and Class 4 NICs (due by 31 January 2026 for online filing).
If not filing a return (e.g., profits <=£1,000 under trading income allowance and no other reasons to file), contact HMRC directly to pay voluntarily.
Deadline Note: You cannot pay voluntary Class 2 through Self Assessment after 31 January 2026. Late payments may require direct arrangement with HMRC.
In SA110 (Tax Calculation Summary), Class 2 is handled in Section 15.
Copy the calculated amount to Box 4.1 on the summary pages.
If voluntary, it’s added to your total tax bill.
Benefits and Why Pay Voluntarily
Qualifying Year: Each year of Class 2 (paid or credited) counts toward:
State Pension (basic or new).
Maternity Allowance.
Bereavement Support Payment.
Contributory Employment and Support Allowance.
Gaps in Record: Voluntary payments fill gaps, especially useful if profits fluctuate or you’re part-time self-employed.
No Impact on Tax: Class 2 doesn’t affect your income tax liability—it’s separate.
Changes for 2024-25
Reform from April 2024: Class 2 became non-mandatory. Previously (2023-24), it was payable if profits exceeded £6,725. Now, it’s credited without payment above the threshold, reducing admin for higher earners. This was announced in the 2023 Autumn Statement to simplify self-employment taxes.
No Retrospective Changes: Applies only from 2024-25 onward.
Records: Keep evidence of profits/expenses for 5 years after filing (or longer if queried).
Help and Issues: Use Helpsheet HS222 for profit calculations. If software glitches occur (e.g., as reported in November 2025 for tax returns), HMRC has resolved them—file as normal.
A taxpayer is liable for tax on self-employment income if they meet any of the following, based solely on self-employment receipts (total income before expenses, including turnover, other business income, balancing charges, and goods/services for own use):
Total receipts exceed £1,000: Receipts up to £1,000 are exempt via the trading income allowance and do not require reporting, unless from a connected party (e.g., family or related business). If over £1,000, you must file a return and either claim the £1,000 allowance (no expenses or other allowances deductible) or deduct allowable expenses/capital allowances to calculate taxable profits. You cannot claim the allowance to create a loss. The allowance can be split across multiple self-employments but caps at £1,000 total.
Voluntary filing even if under £1,000: You must file if you want to voluntarily pay Class 2 National Insurance contributions (NICs) to maintain entitlement to benefits like State Pension, preserve your self-employment record (e.g., for Maternity Allowance), claim Tax Free Childcare based on self-employment income, or reclaim CIS deductions as a subcontractor.
No need to file if under thresholds and no voluntary reasons: If total receipts ≤£1,000 (not from connected parties) and no voluntary NICs or other claims, check if a return is needed via www.gov.uk/check-if-you-need-a-tax-return. If not, notify HMRC by 31 January 2026 to avoid penalties.
Foster/Shared Lives carers: If qualifying care receipts exceed your qualifying amount (calculated via Helpsheet 236), you are liable; use simplified method or full calculation.
Rent-a-Room scheme: If gross receipts from furnished accommodation in your home ≤£7,500 (£3,750 if shared), no liability and no need to complete most boxes; if over, liable unless using the scheme (which caps relief at £7,500/£3,750, no expenses/capital allowances/trading allowance claimable).
Managing Serious Defaulters (MSD) programme: If in this during the year, liable and must use full pages.
Overseas business: If all business abroad and using remittance basis, limited boxes apply; if any UK business, full arising basis applies.
If none apply and you believe no return is needed, confirm via the checker tool.
Impact of Different Income Thresholds
Thresholds directly affect form choice, allowances, and tax rates (self-employment profits treated as non-savings income in tax calculation):
£1,000 (Trading Income Allowance): Exempt if ≤ this; over requires filing. Impacts: Cannot deduct expenses if claimed; no loss creation. For tax calculation, reduces taxable non-savings income.
£90,000 (Turnover Threshold for Short vs. Full Pages): If turnover <£90,000 (or would be if full year), use short pages. If ≥£90,000, or if accounting period not 12 months/ending in tax year, basis change with adjustment income, need to adjust Class 4 NICs profits, or in MSD, use full pages. Impacts: Full pages required for complex adjustments; short for simpler cases.
Tax Bands for Self-Employment Profits (Non-Savings Income): After deductions/allowances, profits are taxed in UK bands (assuming non-Scottish resident; Scottish rates differ but model assumes UK as PDFs focus on general):
First £37,700: 20% (basic rate).
Next £87,440: 40% (higher rate).
Over £125,140: 45% (additional rate).
Personal Allowance (£12,570 standard) reduces taxable income but tapers if adjusted net income >£100,000 (see Section 13 of tax calculation). No savings/dividend allowances apply as only self-employment considered.
If profits create losses, carry forward or set against other income (but model limits to self-employment only).
NICs Thresholds: Class 2 voluntary if profits <£6,725; mandatory if ≥£6,725 (flat rate). Class 4: 9% on profits £12,570-£50,270; 2% over £50,270. Impacts filing if voluntary.
Other Thresholds: £7,500 Rent-a-Room (as above). For tax calculation, if income >£100,000, Personal Allowance reduces by £1 for every £2 over (zero at £125,140). High Income Child Benefit Charge if >£50,000, but not applicable here as only self-employment.
Use cash basis (money in/out) unless opting for traditional accounting (accruals). If changing basis, transitional adjustment may apply.
Information to Put in Every Box (Self-Employment Pages)
Determine form: Use SA103S (Short) if turnover <£90,000 and no complex adjustments; SA103F (Full) otherwise. Print from gov.uk and enter name/UTR (10-digit number from HMRC letters) at top if not pre-printed. For tax calculation (SA110), enter self-employment profits as non-savings income in Section 1.
SA103S (Short Pages) Boxes
Box 1 (Description of business): Enter business type (e.g., “Plumber”, “Qualifying carer” for foster carers, “Rent-a-Room” if using scheme).
Box 4 (If you are a foster carer or shared lives carer): Put ‘X’ if applicable; if qualifying amount > receipts, put ‘0’ in Box 31 and stop; otherwise proceed.
Box 5 (If your business started after 5 April 2024, enter the start date): Enter DD MM YYYY (e.g., 15 05 2024).
Box 6 (If your business ceased before 6 April 2025, enter the final date of trading): Enter DD MM YYYY (not end-of-year date).
Box 7 (Date your books or accounts are made up to): Enter usual annual date (DD MM YYYY, e.g., 05 04 2025); must be after 31 March 2024 and before 6 April 2025, else use full pages.
Box 8 (Traditional accounting): Put ‘X’ if using accruals basis (not cash basis).
Box 9 (Your turnover): Enter total income received/earned before expenses (include cash/card/cheques, tips/commissions, payments in kind, money owed if traditional accounting, full CIS amounts if subcontractor). For Rent-a-Room over limit: gross receipts including services.
Box 10 (Any other business income): Enter trading income not in turnover (e.g., subletting business space, non-arm’s length reverse premiums, third-party trading income).
Box 10.1 (Trading income allowance): Enter up to £1,000 if claiming (against total receipts); cannot exceed receipts or create loss. Leave blank if deducting expenses instead.
Boxes 21, 28, 31 (For specific claims, e.g., Tax Free Childcare or simplified foster care): Enter as directed (e.g., Box 21: expenses if not claiming allowance; Box 28: capital allowances; Box 31: taxable profit/loss).
Box 36 (Voluntary Class 2 NICs): Put ‘X’ if paying voluntarily for benefits.
Box 38 (CIS deductions reclaim): Enter amount to reclaim if subcontractor.
For low-turnover cases (e.g., expect >£1,000 next year or voluntary NICs): Complete only Boxes 1-8 (and ‘X’ in 36 if applicable). For Rent-a-Room under limit: Only Box 1. Provisional: Only Boxes 1,5,9,10,21/22,28,31/32.
SA103F (Full Pages) Boxes
Box 1 (Business name): Enter full business name (unless your own name).
Box 2 (Description of business): Enter business type (e.g., “Qualifying carer” for foster carers, “Rent-a-Room” if using scheme).
Box 6 (If your business started after 5 April 2024): Enter DD MM YYYY.
Box 7 (If your business ceased after 5 April 2024 but before 6 April 2025): Enter DD MM YYYY (not end-of-year).
Box 8 (Date your books or accounts start – the beginning of your accounting period): Enter DD MM YYYY (usually day after prior period end; or start date if new).
Box 9 (Date your books or accounts are made up to or the end of your accounting period): Enter DD MM YYYY (usual annual date; or cease/start date if applicable).
Box 10 (Traditional accounting): Put ‘X’ if using accruals (not cash basis).
Box 13 (Foster carer flag): Put ‘X’ if qualifying carer; if amount > receipts, put ‘0’ in Box 76 and stop.
Box 14 (Other details, if applicable): Enter if MSD or similar.
Box 15 (Total receipts/turnover): Enter total income before expenses (similar to short Box 9; for foster carers: total receipts).
Box 16 (Other business income): Enter as short Box 10.
Box 16.1 (Trading income allowance): Enter up to £1,000 if claiming.
Box 30 (Rent-a-Room relief if over limit): Enter £7,500 (£3,750 if shared).
Box 31 (Qualifying amount for foster carers): Enter if using simplified method.
Box 47/48, 64/65 (Profit/loss): Enter net after expenses/allowances.
Box 59 (Balancing charges): Enter if applicable (e.g., Rent-a-Room).
Box 60 (Goods and services for own use): Enter value.
Box 68 (Adjustments, e.g., for basis period): Enter if period not standard.
Box 73 (Taxable profit): Enter final.
Box 76 (Taxable profit or loss): Enter ‘0’ if no profit; for overseas: limited.
Box 101 (Class 4 NICs adjustments): Enter if needed.
For multiple accounts: Repeat for each, consolidate recent. Provisional: Only Boxes 1-16, 47/48, 64/65, 73, 76/77 (plus 73.3/73.4/74 if applicable). For Rent-a-Room under limit: Only Boxes 1-2; over: Boxes 1-10,15,30,59.
Tax Calculation Summary (SA110) Working Sheet
Enter self-employment taxable profits (from short Box 31 or full Box 76) as non-savings income in Section 1. Complete sections sequentially:
Section 1: Add profits here (non-savings/lump sums).
Section 4: Deduct allowances (e.g., Personal Allowance via Section 13 if >£100,000 income).
Section 5: Taxable income = profits minus allowances.
Section 6: Allocate to bands (e.g., first £37,700 at 20%).
Section 7: Calculate tax due.
Section 15: Add Class 2/4 NICs (thresholds as above).
Other sections: Skip if no savings/dividends/gains/etc.
If transition profits from 2023-24 basis reform: Calculate twice (with/without in Section 1) for separate charge.
Checklist of Documents, Evidences, Receipts, Invoices, and Forms Needed to Submit a Tax Return Correctly
Do not submit any documents with your return unless HMRC asks; keep for records (at least 22 months after tax year end, or longer if enquiry). Checklist for preparation/submission:
Records of income/expenses: Receipts/invoices for all turnover (e.g., sales invoices, bank statements for cash/card payments), other income, balancing charges, goods for own use.
Expense evidences: Invoices/receipts for allowable expenses (e.g., costs deducted if not claiming trading allowance).
Accounts/books: Prepared accounts (cash or traditional basis) showing profit/loss calculation; if provisional, note reasons.
CIS statements: If subcontractor, forms showing deductions to reclaim.
By HMRC rules, to be liable for Income Tax on employment income in the UK for the 2024/25 tax year (6 April 2024 to 5 April 2025), a taxpayer must meet the following criteria, focusing solely on direct employment income (e.g., salary, wages, bonuses, commissions, and taxable benefits from an employer, excluding any non-employment sources like investments, rentals, or self-employment):
Residency and Tax Status: You must be a UK tax resident or treated as such for the tax year. Non-residents may still be liable if they have UK-sourced employment income.
Employment Relationship: You must have an employment contract or be treated as an employee (e.g., not a self-employed contractor). This includes income from direct employment, such as pay before deductions, tips not included on your P60, and taxable benefits like company cars or private medical insurance.
Taxable Income Exceeds Personal Allowance: Liability arises if your total taxable employment income exceeds the Personal Allowance of £12,570. Income below this is tax-free. All direct employment income counts toward this, after any allowable deductions (e.g., pension contributions or professional subscriptions).
No Exemptions Apply: Certain income may be exempt (e.g., some disability payments or specific statutory exemptions), but standard employment pay is taxable if above thresholds.
If these criteria are met, tax is calculated progressively based on income thresholds:
Personal Allowance: £0 to £12,570 – 0% tax.
Basic Rate Band: £12,571 to £50,270 – 20% tax.
Higher Rate Band: £50,271 to £125,140 – 40% tax.
Additional Rate Band: Over £125,140 – 45% tax.
Impact of Income Thresholds:
Personal Allowance Taper: If adjusted net income (including employment income) exceeds £100,000, the Personal Allowance reduces by £1 for every £2 over £100,000. It reaches £0 at £125,140, effectively increasing the marginal tax rate to 60% in the £100,000–£125,140 band due to the loss of allowance.
Other Threshold Effects: Employment income over £50,270 may trigger higher rate tax, affecting reliefs like pension contributions (higher relief claimable). Income over £60,000 may activate the High Income Child Benefit Charge (a tapered charge up to 100% of benefit at £80,000+), though this is not direct tax on income but related. Student loan repayments or other deductions may also apply based on income levels.
PAYE vs. Self-Assessment: Most employment income is taxed via Pay As You Earn (PAYE) by the employer. However, if income thresholds lead to under/overpayment (e.g., due to allowance taper), adjustments may be needed, potentially via Self-Assessment.
These thresholds ensure progressive taxation, with higher earners paying more proportionally. For 2024/25, HMRC can often handle allowance taper adjustments via PAYE tax codes without requiring Self-Assessment for pure PAYE employees.
Employment Income
HMRC Self-Assessment is typically not required if your only income is from direct employment taxed fully via PAYE. However, even with solely employment income, you may need to file if certain criteria are met (e.g., due to income levels or specific circumstances). For the 2024/25 tax year:
High Income Thresholds: Previously, income over £100,000 (or £150,000 for 2023/24) often required Self-Assessment due to Personal Allowance taper calculations. For 2024/25, this is no longer automatic if all income is PAYE-taxed, as HMRC can adjust via your tax code. However, if your employer cannot or does not fully account for the taper, or if you need to confirm/claim adjustments, Self-Assessment may still be needed.
Information to Enter in Each Box on the Tax Return
For HMRC Self-Assessment based solely on employment income, the main form (SA100) requires basic tailoring (e.g., answering “Yes” to having employment income and indicating the number of employments), but detailed employment information goes in the SA102 supplementary page. Below is a list of every box on SA102 and the required information, focusing on direct employment income only. (SA100 has no dedicated employment boxes beyond tailoring questions; all specifics are in SA102.)
Use a separate SA102 page for each employment.
Box 1: Pay from this employment – Enter the gross pay before tax deductions (from P60 “In this employment” or P45 “Total pay in this employment”). Include furlough payments or disguised remuneration loans. If negative due to clawback, enter 0 and claim relief elsewhere.
Box 2: UK tax taken off pay in box 1 – Enter UK tax deducted (from P60 or P45). Use a minus sign if refunded (indicated by ‘R’). Include tax on disguised remuneration paid by employer.
Box 3: Tips and other payments not on your P60 – Enter untaxed tips or gratuities not from employer (e.g., direct customer payments).
Box 3.1: Pension contribution – payment from HMRC – Enter HMRC top-up payments for net pay pension schemes.
Box 4: PAYE tax reference of your employer – Enter employer’s PAYE reference (from P45/P60). Write “None” if absent.
Box 5: Your employer’s name – Enter full employer name.
Box 6: If you were a company director – Put ‘X’ if you were a director (even part-time).
Box 6.1: If you ceased being a director before 6 April 2025 – Enter cessation date (DD MM YYYY) if applicable.
Box 8: If this employment income is from inside off-payroll working engagements – Put ‘X’ if income from IR35/off-payroll rules (e.g., via personal service company with deductions paid to HMRC).
Box 8.1: If box 1 includes any disguised remuneration income – Put ‘X’ if applicable.
Box 9: Company cars and vans – Enter cash equivalent (from P11D, if not payrolled).
Box 10: Fuel for company cars and vans – Enter cash equivalent or amount foregone (from P11D, if not payrolled).
Box 11: Private medical and dental insurance – Enter value (from P11D, if not payrolled).
Box 12: Vouchers, credit cards and excess mileage allowance – Enter values (from P11D, if not payrolled; e.g., vouchers over limits or mileage above approved rates).
Box 13: Goods and other assets provided by your employer – Enter market value (from P11D, if not payrolled).
Box 14: Accommodation provided by your employer – Enter cash equivalent (from P11D, if not payrolled).
Box 15: Other benefits (including interest-free and low interest loans) – Enter total value (from P11D, if not payrolled).
Box 16: Expenses payments received and balancing charges – Enter amounts (from P11D, if not payrolled).
Box 17: Business travel and subsistence expenses – Enter allowable expenses you paid (e.g., business mileage shortfall below approved rates; keep records).
Box 18: Fixed deductions for expenses – Enter flat-rate allowances (e.g., for tools/clothing; from tax code or standard rates).
Box 19: Professional fees and subscriptions – Enter approved professional body fees.
Box 20: Other expenses and capital allowances – Enter other allowable costs (e.g., home working, equipment; claim capital allowances for qualifying items).
Checklist of Documents, Evidences, Receipts, Invoices, and Forms
Policy context Making Tax Digital (MTD), introduced by HM Revenue and Customs (HMRC) as part of the UK government’s broader digital transformation agenda, represents a fundamental shift in how taxes are recorded, reported, and administered. At its core, MTD mandates the use of digital tools for tax compliance, replacing traditional paper-based or manual systems with software that integrates directly with HMRC’s platforms.
Rationale This initiative, first announced in 2015, aims to enhance efficiency, reduce the tax gap (estimated at billions annually due to errors, evasion, or avoidance), and provide taxpayers with more timely insights into their tax positions. While proponents highlight its potential for streamlining processes, critics point to implementation burdens, particularly for small businesses and those less tech-savvy, underscoring the need for balanced perspectives on its rollout.
Objectives The program’s objectives are multifaceted. Primarily, it seeks to modernize the tax system by leveraging technology to automate record-keeping and submissions, thereby minimizing human error and improving data accuracy. For instance, digital records allow for real-time tracking of income and expenses, which can help taxpayers avoid underpayments or overpayments. Additionally, MTD aligns with global trends toward digital taxation, preparing UK businesses for a future where integrated systems could facilitate faster refunds and better compliance monitoring.
Efficacy and reception However, surveys indicate that these benefits are not universally experienced; a 2020 study found nearly 90% of respondents reporting no reduction in errors from MTD for VAT, with compliance costs often exceeding government estimates. More recent 2025 feedback echoes this, with many businesses and agents perceiving limited advantages for Income Tax implementations, suggesting that while the framework is sound in theory, practical outcomes vary based on user preparedness and software quality.
Implementation and rollout MTD has been implemented in phases, targeting different tax types to allow gradual adoption. The first phase focused on Value Added Tax (VAT), which became mandatory for businesses with taxable turnover above £85,000 in April 2019, and was extended to all VAT-registered entities by April 2022, regardless of size. This phase required digital record-keeping and quarterly VAT return submissions via compatible software, with bridging tools allowed for those using spreadsheets. Penalties for non-compliance start with points-based systems leading to fines, emphasizing HMRC’s enforcement approach.
The second major phase addresses Income Tax Self Assessment (ITSA), set to commence on 6 April 2026 for sole traders and landlords whose combined self-employment and property income exceeds £50,000 annually. This threshold is slated to drop to £30,000 in April 2027 and further to £20,000 by April 2028, as announced in the Spring Statement 2025, potentially affecting nearly 1 million additional taxpayers. Notably, basis period reform accompanies this, aligning accounting periods with the tax year to simplify calculations.
For Corporation Tax, initial plans for digital mandation were abandoned in July 2025 as part of HMRC’s Transformation Roadmap, which prioritized other digital enhancements like improved online portals over full MTD extension, citing complexity and low expected benefits for companies already using advanced accounting systems.
Requirements and challenges for taxpayersand businesses Requirements under MTD are standardized yet tailored by tax type. For all applicable users, compatible software must be used—options range from free basic tools for simple needs to paid advanced platforms like those from QuickBooks or Xero, which must support API connections to HMRC for seamless data transfer.
Records must be digital from the outset, covering income, expenses, adjustments, and corrections, with no reliance on paper unless digitized. Quarterly updates for ITSA, for example, are not full tax returns but summaries that help build a running tax estimate, culminating in the annual finalization. Agents can manage this on behalf of clients, with multiple agents assignable for different tasks. Exemptions are available for digitally excluded individuals (e.g., due to disability, location, or religious beliefs), those below income thresholds, or complex entities like trusts and partnerships (deferred indefinitely).
Penalties for late or inaccurate submissions follow a reformed system, starting with warnings and escalating to financial charges, though HMRC emphasizes support over punishment during transitions. For UK expats, compliance is required if they have UK-sourced income meeting thresholds, involving digital records and updates regardless of residence.
Criticisms and challenges The benefits of MTD are often touted by HMRC and supporters as transformative. Enhanced data security through cloud-based storage reduces risks associated with physical documents, while automated calculations minimize input errors—potentially saving time and money in the long run. Real-time tax position views enable better cash flow management, and the system facilitates quicker HMRC responses to queries or refunds.
A 2024 government report on lower-income self-employed individuals acknowledged software’s role in improving record-keeping, with some users reporting reduced stress from organized digital trails. Proponents also note environmental gains from less paper use and alignment with digital economies, preparing businesses for integrations like AI-driven audits. However, criticisms abound, highlighting potential drawbacks.
Small business burden and the ‘digital divide‘ Small businesses frequently cite high transition costs, including software subscriptions (up to £24 monthly for some tools) and training, which contradict early promises of minimal burden. Surveys from 2025 reveal that most agents and businesses anticipate no net benefits for ITSA, with increased administrative loads and no tangible error reductions observed in VAT phases.
Critics argue the program overlooks the digital divide, burdening less tech-literate users or those in rural areas with poor internet. Additionally, the quarterly reporting cadence has been called overly frequent, potentially increasing accounting fees without proportional value. Broader controversies include privacy concerns over data sharing with HMRC and the perception that MTD primarily benefits the Treasury by closing the tax gap at taxpayers’ expense, rather than simplifying lives.
HMRC guidance and help Recent updates as of December 2025 reflect ongoing refinements. HMRC’s July 2025 Transformation Roadmap outlined a pivot from expansive MTD mandates to targeted digital improvements, such as enhanced online accounts and voluntary tools, following stakeholder feedback. In November 2025, letters were dispatched to impending ITSA compliers, providing personalized guidance and sign-up prompts. Technical guidance was refreshed on 17 December 2025, adding clarifications on eligibility and agent roles.
For software developers, end-to-end service guides were updated in September 2025 to facilitate better API integrations. Looking ahead, while Corporation Tax MTD is off the table, HMRC continues to explore voluntary digital options for companies, and pilots for ITSA elements may emerge in 2026. Taxpayers are encouraged to consult HMRC’s help resources, including webinars and videos, or seek professional advice to navigate these changes effectively.
Overall, MTD embodies the UK’s commitment to a digital tax future, but its success hinges on addressing implementation challenges to ensure equitable benefits across all stakeholders.
