How do I record complex transactions (Capital, vehicle expenses, CIS etc) in Monzo’s Making Tax Digital tool?

Some of the transactions that sole traders and landlords need to record for Making Tax Digital for Income Tax are not as simple as logging an income or an expense. Here is how to record some of the most common of these transactions in Monzo's submission tool:

Fees deducted before payments reach your account(s)

In some cases, such as users who receive invoice payments from Stripe, you may have transactions where an amount was taken off before you received the funds.

For these cases, you can use the Fees option when creating a manual transaction to make sure the total amount you received is logged as income, and just the fee is logged as an expense.

If you received a payment with a fee deducted in your Monzo Business account, you can:

Go to the Making Tax Digital section of the app.
Create a new manual transaction.
Tap on the Fee option.
Enter only the amount that was deducted from the payment
Fill out the remaining details for the transaction.

If you received a payment with a fee deducted in cash or a different Business account, you can:

Log the total amount you were paid (the amount of the transaction + the amount of the fee that was deducted) as one manual transaction and as income, then log just the amount of the fee as a second manual transaction and as an expense. You can then add the tax categories to these manual transactions.
Or you can log the amount you received as one manual transaction and as income, then log the amount of the fee as a second manual transaction and as a Fee, which will create both the income and expense transactions for you automatically so you can add the correct tax categories.

PAYE (Pay As You Earn) income and pensions income

These types of income are not tracked under Making Tax Digital for Income Tax. You do not need to record these as allowable in Monzo's tool or submit these transactions in your quarterly updates.

You can use a tax category that does not include these transactions in your quarterly updates to HMRC (such as Non-business income)

Income with CIS deducted

HMRC tracks CIS deductions for end of year submissions, so you don't need to log the CIS deduction as an expense taken off the amount, however you do need to log the amount received plus the CIS deduction as business income.

If you received the income in your Monzo Business account, you should create a manual income transaction just for the value of the CIS deduction. This could be a percentage of the whole income, or part of the income (labour only).
If you received the income in a separate business account or in cash, please create a manual income transaction for the total amount received + the CIS deducted (also called the gross income)

Interest and dividends

You do not need to include these items in your quarterly updates, but you do still need to report these funds in your end of year submission.

In Monzo’s MTD tool, you can use a tax category that does not include these transactions in your quarterly updates to HMRC (such as Non-business income), then report these funds in your end of year submission to HMRC.

Pension contributions

You do not need to record these transactions in your quarterly updates, but still need to report them in your end of year submission.

You can use a tax category in Monzo's tool that does not include these transactions in your quarterly updates to HMRC (e.g. Personal cost or Not relevant to my business), then report these funds in your end of year submission to HMRC.

Capital allowances

Capital allowances largely depend on your individual tax circumstances. Monzo is not regulated to provide tax advice so you will need to discuss this with HMRC, an accountant or a tax expert.

In our tool, you can choose to either log these costs as expenses to be reported in the quarterly updates by assigning the correct tax category for the item bought, or you can choose to assign it a tax category which is not reported in quarterly updates (e.g. Personal cost or Not relevant to my business), then report these amounts in your end of year submission to HMRC.

Vehicle expenses (e.g. mileage)

Sole traders and landlords who can claim vehicle expenses can record these transactions in one of two ways in Monzo's tool:

If you use Simplified expenses (a flat rate), you can apply the relevant flat rate per mile and report this as a manual expense transaction by assigning the 'Car, van and travel expenses' category for each quarter, then marking these transactions as allowable.
The cost of the vehicle and other running costs cannot be claimed when using this method, so any of these expenses would be categorised as 'Not relevant for my business' or for accuracy you can assign them to 'Car, van and travel expenses' then mark these funds as disallowable.
If you record the total actual running costs of the vehicle, then categorise them as 'Car, van and travel expenses'.
Next, you mark only the percentage of these amounts that were used for business purposes as allowable.
Any vehicle running costs from personal use must be categorised as disallowable.
There are several rules around reporting your vehicle costs as business expenses, please read through them in more detail here.
Under this option, you can also claim capital allowances for the vehicle purchase but only in your end of year submission to HMRC. To record the capital allowances for a vehicle purchase correctly in our tool, assign these expenses to 'Car, van and travel expenses' tax category, then mark the funds as disallowable.

If you aren't sure whether you are recording your individual transactions correctly or which expenses you can claim, please consider speaking with HMRC, an accountant or a tax expert for the most up to date advice on how to record your finances for Making Tax Digital.

How do I record complex transactions (Capital, vehicle expenses, CIS etc) in Monzo’s Making Tax Digital tool?

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