Adjust your self-employment and property income
Source: gov.uk (2025-04-03)

How to make adjustments after you have sent your final quarterly update.

Throughout the year, you should have been correcting your digital records to make sure they are accurate.

After you have sent your fourth quarterly update (https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/send-quarterly-updates), your software will show your self-employment and property income and expenses for the whole of the tax year, for each business that you have.

You may then need to adjust the data you have sent, before you finalise your Income Tax position and submit your tax return. This could include:
- making tax adjustments, such as removing disallowable expenses
- making accounting adjustments, such as for prepayments or accruals
- adjusting your income and expenses, if you use an accounting period that is not aligned to the tax year (for example, 1 April to 31 March)
- claiming reliefs or allowances, such as capital allowances, Rent a Room relief or using the trading or property income allowance
Making adjustments

You will make most adjustments by changing the annual total for an expense category. The category total might represent a single digital record or many. This means you do not need to adjust each relevant individual transaction.

Tax adjustments

You will make tax adjustments by adjusting the annual totals of your expenses.

For example, if you have one phone for business and personal use, you will need to reduce the category total for phone, fax, stationery and other office costs, so that it only reflects the amount you’ve used for your business.

Accounting adjustments

If you use traditional accounting (https://www.gov.uk/self-employed-records), your software should allow you to adjust the annual totals from your quarterly updates to address accounting adjustments, such as for prepayments or accruals.

Example of an adjustment for a prepayment

You may pay £1,200 in January for a 12-month insurance policy. Instead of recording the full cost in January, you may choose to spread this expense over 12 months, at £100 per month. This would mean one quarter of the expense falls into the first tax year, and three quarters into the next.

To do this, you would reduce the category total for rent, rates, power and insurance costs for the first tax year and increase it for the next, to reflect what is paid in each tax year.

Example of an adjustment for an accrual

You have received services from a consultant in March 2025 but have not been invoiced. To reflect the costs you have incurred, you may want to record an accrual in that tax year (2024 to 2025). This means your expenses will be matched to the same period.

If your accounting period runs from 1 April to 31 March

You need to make an adjustment at the end of the first tax year where you have chosen to use calendar update periods. This is so your income and expenses from 1 April to 5 April from before the beginning of that tax year are included in your tax return.

For example, if you sign up to use Making Tax Digital for Income Tax for the 2025 to 2026 tax year, you’ll need to adjust your totals to include your income and expenses from 1 April 2025 to 5 April 2025. To do this, you should adjust the totals for relevant income and expense categories to cover this period in your compatible software.

You will not need to do this for future tax years if you continue using Making Tax Digital for Income Tax.

Find out more about late accounting date rules in the HMRC Business Income Manual (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim81210).

Claiming reliefs or allowances

You may be able to claim reliefs or allowances that will reduce your Income Tax liability.

Capital allowances

Capital allowances (https://www.gov.uk/capital-allowances) are a type of tax relief for businesses. They let you deduct some or all of the value of an item from your profits before you pay tax.

You will need to use your software to record your capital allowance claim before you submit your tax return. Your software may be able to record your claim during the tax year, but HMRC will not process your claim until you have submitted your tax return.

Rent a room relief

The Rent a Room Scheme (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme) lets you earn up to a threshold of £7,500 per year tax-free from letting out furnished accommodation in your home. This is halved if you share the income with your partner or someone else.

You can claim rent a room relief either:
- during the tax year through your quarterly updates
- after the end of the tax year through your final quarterly update
If you decide at the end of the tax year that you would like to claim your expenses instead of the relief, you will need to make this adjustment in your final quarterly update before submitting your tax return.

Trading or property income allowances

During the tax year you will have created digital records of all your property and self-employment income and expenses.

If you want to claim tax-free allowances on your property and trading income (https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income), you will need to use your compatible software to claim the allowance after the end of the tax year. You will need to claim the allowance before you submit your tax return.

What to do next

You should then finalise your Income Tax position and submit your tax return (https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/submit-your-tax-return).