Categories describe what a transaction is in tax terms. When you assign a category, you tell Sage how to treat that transaction for reporting and Making Tax Digital (MTD) for Income Tax.
Sage provides a fixed list of categories that align with HMRC Self Assessment rules. You can't rename or create new core categories, which keeps your records consistent and easier to review later.
Sage Sole Trader doesn’t use a traditional chart of accounts and you can’t view a fixed list of nominal ledgers. You work with categories instead.
Categories help Sage to:
A category doesn't decide what you can claim. It only describes the nature of the transaction.
Use a business category when the transaction relates directly to running or earning income from your business.
Examples include:
If the cost supports your business activity, a business category usually fits.
Use non-business when a transaction is personal or doesn’t relate to your business.
Common examples include:
Non-business items stay visible in Sage but stay out of your tax calculations.
Some payments include both business and personal elements. You can split these transactions into separate lines.
Typical scenarios include:
Splitting reflects what actually happened and keeps your records clearer if questions arise later.
Some costs support both business and personal use, such as home internet or mobile phone bills.
When this happens:
This approach keeps claims reasonable and easier to explain.
Some items never form part of business income or expenses and belong in your personal tax position instead.
Examples include:
You don't report these through business categories in Sage Sole Trader.
Categories support good record-keeping, not tax advice. If a transaction feels unclear or unusual, pause and get advice before you submit.
Your accountant or HMRC can confirm how to treat costs for your situation.