What are the HMRC Simpler tax categories for sole trader transactions?
There are a number of different categories used by HMRC when you file your taxes to help you separate and organise your business finances.
If you are able to use Simpler tax categories, there are less options to help simplify how you report to HMRC.
Please be aware that Monzo cannot provide any advice on how to categorise your individual finances, as we are not regulated to provide tax advice. If you are not sure which category to use, please consider contacting HMRC, researching the categories online, or getting professional tax advice.
If you are looking for the Simpler tax categories for landlords, please use this article
Here is a list of the Simpler tax categories available to sole traders that are not landlords with Monzo and some examples:
Income Categories:
Business earnings
Money you earn from your main work or services.
Examples: customer payments, project income, product sales.
Non-business income
Money you receive that isn't related to your business.
Examples: gifts, personal income, refunds unrelated to your business.
Other business income
Money linked to your business but not from your usual trading activities.
Examples: grants, compensation, tips, selling old equipment.
Tax taken off trading income
Other tax taken off trading income apart from CIS deductions.
Examples:
This is a refund I have received
A refund that your business has received. Please select the category that matches the expense transaction for the refund.
Examples: Refund for returned supplies or a cancelled service
Expense Categories:
Business Expense
This is a cost that helps you to run your business.
Examples: Supplies, Marketing, travel, utilities for business premises
Refund Given
This is a refund that you have given from your business account(s). Please select the category that matches the income transaction for the refund.
Example: Client cancelled a service or order
Other Categories:
Paying myself
Payments to yourself from the business.
Examples: Personal funds, reimbursed expenses
Paying taxes
Payments to HMRC from your business.
Examples: Income Tax, National Insurance Contributions
Personal cost
Money spent on something that wasn’t for your business.
Examples: your home food shopping, medical prescriptions
Transfers
Money moving between your business accounts. If you choose this category, it will automatically create a corresponding manual transaction as a Transfer to balance the report to HMRC.
Example: Cash deposited into your Monzo account, payment from an external business account to your Monzo account.
Not relevant to my business
Money moved into or out of the business account that does not relate to your taxable income.
Examples: Mistaken transfer, Income for another business
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