The short answer
Under Making Tax Digital you make year-end adjustments in your software, usually after your fourth quarterly update. In SimpleTaxFlow, open Tax and choose Open year-end steps. Use Allowances for capital allowances and annual adjustments. Use Adjustments to change HMRC’s business summary, called the BSAS. Both work for self-employment and UK property. Foreign property is not supported yet.
Is this the right guide?
Use this guide when your quarterly updates are sent and you need to claim allowances or correct your yearly business figures before your tax return. Many people need no year-end adjustments at all.
To understand what capital allowances and annual adjustments are, read our explainer on annual allowances first. Losses have their own guide.
Year-end adjustments under Making Tax Digital
Quarterly updates need no accounting or tax adjustments. After your fourth update, HMRC expects you to make them in your software before you submit your tax return. They include allowances such as the trading allowance, removing expenses you cannot claim, accounting adjustments and capital allowances.
You adjust the total for the year, not individual transactions. The cash basis is HMRC’s default, and if you use it you do not make accruals or prepayment adjustments. Capital allowance claims are recorded in your software, and HMRC only processes them when you submit your tax return.
Allowances or a BSAS adjustment?
SimpleTaxFlow has two places for year-end work. Pick the one that matches what you need to change.
| Compare | Allowances | Adjustments (BSAS) |
|---|---|---|
| What it changes | Adds reliefs and annual corrections, such as capital allowances or goods taken for own use | Changes HMRC’s own summary of a business’s income and expenses |
| When | Any time in the tax year | After your quarterly updates are sent |
| How you save it | Save to HMRC | Submit adjustments |
| UK property | Yes | Income and expense adjustments only |
What you need
- All four quarterly updates sent for each business.
- Receipts for any equipment or other assets you bought in the year.
- Whether you use the cash basis or traditional accounting.
- A note of anything in your figures that you cannot claim, such as private use.
1. Check your final quarterly update
Open Tax and choose Open year-end steps. If you corrected records after your fourth update, use Resend Q4 if changed to send the corrected figures first. Your adjustments then start from your final figures.
Open Tax2. Open Allowances
Under Allowances, adjustments and losses, choose Allowances. You can also choose More, then Annual allowances under Your tax tools. If you have more than one business, choose its tab. Check the Tax year.
Open Tax3. Enter allowances and adjustments
Fill in only the boxes that apply. Allowances include Annual investment allowance and Capital allowance (main pool). Adjustments include Goods & services for own use and, for property, Private use adjustment. Each box has a short tip. Trading income allowance and Property income allowance cannot be combined with expenses.
Read about allowances4. Save to HMRC
Choose Save to HMRC. You see HMRC accepted the update. You can save at any time in the tax year. HMRC uses these figures when you submit your tax return.
Open Tax5. Review HMRC’s business summary
Choose Adjustments to open Business Source Adjustable Summary. Choose Trigger new BSAS to ask HMRC for its latest profit figure. Then choose View detail to see Total income, Total expenses and Net profit or Net loss.
Open Tax6. Make a BSAS adjustment if needed
If the summary needs changing, choose Make adjustments. Values are filled in from HMRC’s summary. Change only what is wrong and choose Submit adjustments. UK property allows income and expense adjustments only. Skip this step if the profit is right.
Open Tax7. Re-apply after a later change
If you send another update after a BSAS adjustment, the business shows BSAS invalidated. Trigger a new BSAS and make the adjustment again before your tax return.
Submit your tax returnA worked example
Robin (fictional) is a self-employed decorator who uses traditional accounting. Robin recorded the whole phone bill in the year, but £600 of it was private use. Robin also bought new spraying equipment for £10,000.
After the fourth update, Robin triggers a new BSAS and chooses Make adjustments to take the £600 private use out of expenses. Then Robin opens Allowances, enters 10000 in Annual investment allowance and chooses Save to HMRC.
- Turnover in quarterly updates
- £50,000
- Expenses in quarterly updates
- £14,000
- Profit in HMRC’s business summary
- £36,000
- Private phone use removed in the BSAS
- £600
- Profit after the BSAS adjustment
- £36,600
- Annual investment allowance for the equipment
- £10,000
HMRC applies the allowance when it calculates your tax return. The tax itself comes from HMRC’s calculation.
Common mistakes
- Adjusting before the fourth quarterly update is final, so the adjustment is invalidated later.
- Claiming an allowance on equipment you already claimed as an expense under the cash basis.
- Using the trading or property income allowance and claiming expenses as well.
- Forgetting to re-apply a BSAS adjustment after the business shows BSAS invalidated.
How to check it worked
After saving allowances you see HMRC accepted the update. In Business Source Adjustable Summary, the latest entry shows Adjusted once HMRC accepts your change, and View detail shows the new Net profit or Net loss.
Then open HMRC’s calculation from the year-end steps and check the figures before you submit your tax return.
Before you move on
- Your fourth quarterly update holds your final figures
- Allowances are saved to HMRC for each business that needs them
- Any BSAS adjustment was made on the latest summary
- £30.00 + VAT a year or £3.50 + VAT a month. Bookkeeping is free. Pay when you send to HMRC.
Frequently asked questions
What is the difference between allowances and a BSAS adjustment?
Allowances and annual adjustments add reliefs and corrections to your year, such as capital allowances. A BSAS adjustment changes HMRC’s own summary of your income and expenses for a business.
Can I add allowances before the tax year ends?
Yes. You can save allowances at any time in the tax year. HMRC uses them when you submit your tax return.
Can I make year-end adjustments for foreign property?
Not yet. SimpleTaxFlow supports self-employment and UK property.
Do I need year-end adjustments if I use the cash basis?
Often not. Cash basis users do not make accruals or prepayment adjustments. You may still need to remove private use or claim an allowance, so check before you submit your tax return.
Check the official rules
Tax rules can change and individual circumstances matter. Use HMRC’s current guidance to confirm the treatment that applies to you.
Put the guide into practice.
Open the relevant workspace and complete the next step with this guide available in another tab.
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