Voice and visuals made with automated software, including AI.
Making Tax Digital uses the Self Assessment categories: 13 expense categories for a sole trader and 9 for UK property, per HMRC's direction checked 16 October 2026. Under £90,000 turnover, you can send just total income and total expenses.
Making Tax Digital for Income Tax (MTD) asks you to give every digital record three things: the amount, the date and a category. GOV.UK says MTD uses the same categories as Self Assessment, and HMRC's quarterly update direction, made under the Income Tax (Digital Obligations) Regulations 2026, sets them out. Your software adds the records up, and each quarterly update sends HMRC a total for each category for the tax year so far.
Want your books sorted?
We sort your books and prepare your quarterly figures. You send them to HMRC yourself with free Making Tax Digital software.
Founding offer on Trades Tax (coming later), first 500 trades clients: £5 a month for your first 3 months, then £35 a month. Cancel any time. We’ll remind you before it changes. Prices include VAT. No payment is taken while you wait.
Are you ready for Making Tax Digital? Check your start date and what to sort first. It’s free and takes a minute.
Categories for a sole trader
Self-employment income has 2 categories: "Turnover" and "Other business income". Expenses have 13. The names below are HMRC's; the examples are typical costs for a trade that GOV.UK lists as allowable, except where the table says otherwise.
| HMRC expense category | Trade example |
|---|---|
| Cost of goods bought for resale or goods used | Plasterboard, cable, pipe fittings |
| Construction industry — payments to subcontractors | Paying another trade on your job |
| Wages, salaries, and other staff costs | An apprentice's pay |
| Car, van, and travel expenses | Van fuel, parking |
| Rent, rates, power, and insurance costs | Public liability insurance, a rented unit |
| Repairs and maintenance of property and equipment | Fixing a mixer or your workshop |
| Phone, fax, stationery, and other office costs | The business share of your phone bill |
| Advertising | A directory listing, website costs |
| Business entertainment costs | Taking a client out, which you usually cannot claim |
| Interest on bank and other loans | Interest on a van loan |
| Bank, credit card and other financial charges | Card machine and bank fees |
| Accountancy, legal and other professional fees | A solicitor or surveyor hired for the business |
| Other business expenses | Anything that fits nowhere else |
A category existing does not make a cost allowable: van repairs, for example, go under car, van and travel, and entertaining clients is usually not claimable. Where a cost is partly personal, or not allowed at all, you can correct the category total at the end of the year. GOV.UK's own example is a phone used for work and home, where you reduce "phone, fax, stationery and other office costs" to the business share before your tax return.
Categories for UK property
UK property income has 4 categories: "Total rent", "Other income from property", "Premiums for the grant of a lease" and "Reverse premiums and inducements". Expenses have 9.
| HMRC expense category | Landlord example |
|---|---|
| Rent, rates, insurance and ground rents | Landlord insurance, ground rent |
| Property repairs and maintenance | Fixing a boiler or a leaking roof |
| Non-residential property finance costs | Interest on a loan for a shop you let |
| Residential property finance costs | Buy-to-let mortgage interest |
| Residential finance costs brought forward | Finance costs not yet relieved in an earlier year |
| Legal, management and other professional fees | Letting agent fees |
| Costs of services provided, including wages | Wages of a gardener or cleaner |
| Travel expenses | Trips to inspect the property |
| Other allowable property expenses | Anything that fits nowhere else |
All your UK lets count as one property business, so you do not keep separate categories for each house. Foreign property has its own, shorter list.
The simpler option under £90,000
If your turnover from a self-employment, or your total UK property turnover, is less than £90,000, you can categorise in less detail. £90,000 is the VAT registration threshold, which HMRC's record-keeping direction uses as the line. A sole trader then only records whether each item is income or an expense, and the update carries two totals.
Take a plasterer whose first update covers 6 April to 5 July 2027. Income is £11,800. Costs are £1,940 for materials, £860 for the van, £96 for the phone and £312 for insurance. In full, that update shows four expense totals. Using the simpler option, it shows £11,800 of income and £3,208 of expenses.
Landlords with residential lets get less of a shortcut. Even under £90,000, you must record whether each expense is a restricted finance cost, such as mortgage interest, and send those separately.
Two limits apply. If you have more than one business, each must be under £90,000 for you to use the simpler option for both. And if turnover reaches £90,000, you must categorise every record for that business in full, back to the start of the tax year and for the following year, before you can send the next update. GOV.UK suggests categorising in full if you are unsure.
What this means for you
If you are a sole-trader electrician, decorator or joiner, or a landlord with a few lets, check your turnover first. Under £90,000, income or expense is enough, plus the finance cost split for residential lets. Fuller categories still help: year-end adjustments are made to category totals, and the tax estimate you see after each update is only as good as your records. If you pay other subcontractors under CIS, keep those payments in their own category, because HMRC lists them separately.
Steps to set up your categories
- Check your turnover for each business against £90,000. If you are unsure you will stay under it, categorise in full from the start of the tax year.
- In your software, link each bank feed to the right business: trade or property.
- Sort each transaction as it comes in. Landlords mark mortgage interest separately every time.
- Before each update, scan the totals for anything in the wrong place, such as a personal purchase.
- At the end of the year, adjust any category totals for personal use before your tax return.
The free MTD check shows when MTD starts for you. Our records guide covers the rest, and the trades section and landlords section have more.
Hold your place on the waitlist
We’ll email you when Trades Tax opens, with the founding offer while places last. No payment is taken.
Questions people ask
Are the Making Tax Digital categories new?
No. GOV.UK says Making Tax Digital for Income Tax uses the same income and expense categories as Self Assessment. HMRC's quarterly update direction lists them.
Do I have to sort every receipt into a category?
Not if your turnover from that business is under £90,000. You can then record each item as just income or an expense, and your update carries the two totals.
Does a landlord under £90,000 still need to separate mortgage interest?
Yes. A landlord with residential property income must record whether each expense is a restricted finance cost, such as mortgage interest, and send those costs separately from other expenses.
Does HMRC see my individual receipts?
No. A quarterly update carries the total for each category for the tax year so far. HMRC does not receive individual receipts or invoices.
What happens if my turnover goes over £90,000 partway through the year?
You must categorise every record for that business in full, back to the start of the tax year, before you can send your next update or your tax return.
Sources
- Making Tax Digital for Income Tax: Quarterly update direction (GOV.UK)
- Making Tax Digital for Income Tax: digital record-keeping direction (GOV.UK)
- Use Making Tax Digital for Income Tax: Create digital records (GOV.UK)
- Use Making Tax Digital for Income Tax: Send quarterly updates (GOV.UK)
- Use Making Tax Digital for Income Tax: Adjust your self-employment and property income (GOV.UK)
- Register for VAT: when to register (GOV.UK)
- The Income Tax (Digital Obligations) Regulations 2026, SI 2026/336 (legislation.gov.uk)
- Expenses if you're self-employed (GOV.UK)
- Income Tax when you rent out a property: working out your rental income (GOV.UK)
This is general information to help you understand the rules. It isn't tailored to your circumstances, so check your own position before acting on it.
Righto Tax is a trading name of NJG Consultancy Ltd, registered in England and Wales, company number 16095900. Registered office: Jubilee House, East Beach, Lytham St Annes, FY8 5FT.
What happens next
- Use the free Making Tax Digital checker to see your own start date and deadlines.
- See what Righto Tax for Trades does for you, and join the waitlist.
- Questions about this page? Email hello@rightotax.co.uk.