Set up Making Tax Digital for Income Tax

MTD for Income Tax changes how you record income and expenses and send updates to HMRC.

In Sage Accounting, you connect your business to HMRC, confirm your details, and turn on the Income Tax features.

You can then submit quarterly updates and complete your end of period tasks in Sage Accounting.

Before you start, check you:

• Meet HMRC’s criteria and sign up for MTD for Income Tax on the HMRC website: gov.uk/government/collections/making-tax-digital-for-income-tax
• Have HMRC’s confirmation email before you connect Sage Accounting
• Have your Government Gateway user ID and password
• Have your National Insurance number
• Use the business type Small Business, Sole Trader, or UK property business

If your business type is wrong, change it before you start setup.

Set up Income Tax

1. In Sage Accounting, go to Reports, then select Income Tax.
2. In Setup tasks, complete Sign up for Making Tax Digital on HMRC.
3. If you’ve already signed up on the HMRC website, select I’m already set up.
4. If you haven’t signed up yet, select Sign up on HMRC.
5. Complete the HMRC sign-up process in your browser.
6. Return to Sage Accounting after HMRC confirms your sign-up.

Connect Sage Accounting to HMRC

7. Select Connect to HMRC.
8. In the HMRC connection wizard, select Continue.
9. Enter your Government Gateway user ID and password, then follow the HMRC steps.
10. When you return to Sage Accounting, enter your National Insurance number.
11. Select Continue.

Confirm your business details

12. When Sage finds one business, review the details and skip to step 15.
    NOTE:

    For multiple businesses, create a separate Sage Accounting business for each one.

13. If Sage finds multiple property businesses, select the one you want to use.
    If HMRC returns multiple income sources, select the one to link to your Accounting instance.
14. If you’re setting up a property business, answer the question about ownership:
    • Select Yes if you own all properties in the business
    • Select No if you don’t own all properties, then enter your ownership share percentage
15. Select Continue.
16. On the Business overview page, check the details.
17. Select Confirm if the details are correct.

Check your Income Tax categories

18. Sage Accounting tries to map your tax categories automatically.
19. If Sage Accounting maps all your categories correctly, your setup is complete.
20. If some categories are missing, select View missing categories.
21. Add the missing categories in Chart of Accounts.
22. Use our Income Tax category mapping guide to match HMRC categories to your ledger accounts.

• Change your business type for Income Tax setup
• Check and assign Income Tax categories
• Use different ownership shares for properties