Self Employed MTD

Hi Nikhil,

Under the rules for Making Tax Digital (MTD) for Income Tax, you are required to maintain digital records of your business income and expenses. Whether you actually need to match bank transactions to specific invoices or bills depends on which bookkeeping process you choose to follow in Clear Books.

There are two primary ways to stay compliant within the software:

1. The "Bank-Led" Method (Matching) If you use a dedicated business bank account and have a high volume of transactions, we recommend linking your bank account via a bank feed.

How it works: You import your real-world transactions and "Explain" them.

Matching: In this workflow, Clear Books helps you avoid double-counting by allowing you to match (allocate) money received or paid to any outstanding invoices or bills you've already recorded.

MTD Effect: This process builds your bank balance in the software and ensures your digital records exactly match your actual bank statements.

2. The "Manual Entry" Method (No Matching Required) If you have very few transactions or do not use a dedicated business account, you can use a simplified approach that does not require matching bank transactions.

How it works: You simply use the Record income and Record expenses buttons on your dashboard to manually transactions.

Tommy