HMRC permits simpler income-and-expense categorisation below the applicable £90,000 turnover limit, subject to its conditions. This does not remove digital records or updates. Check the business, year and treatment when turnover reaches the limit before using the simplified categories.
What the £90,000 figure means
HMRC permits simpler categorisation where turnover from a self-employment source, or total UK property turnover, is less than £90,000. The guidance applies the test to the relevant income source. Foreign property has its own treatment, so do not apply the UK turnover test automatically to overseas rent.
For an eligible sole trader, a transaction may be recorded as income or an expense without selecting a detailed expense category. A UK residential landlord must still identify restricted finance costs separately. Mortgage interest should therefore not disappear into a single general expenses total.
Simpler categories still need supporting records
Keep invoices, receipts, statements and explanations of business use. A simpler category is not permission to claim personal spending or to report only the money left in the bank. Your accountant still needs to establish the correct taxable result at year-end.
For example, a £70,000-turnover sole trader might qualify for less detailed categorisation. That does not establish whether the person must register for VAT, because VAT uses its own taxable-turnover rules and tests.
What if turnover reaches £90,000?
HMRC requires full categorisation for that income source, including records from the beginning of the current tax year and in the following tax year. Leaving the change until the next update can create extra bookkeeping work. If turnover is likely to reach the limit, detailed categories from the start may be more practical.
Agree a method before records are imported
Tell your accountant about every trade and property business, expected turnover and existing categories. Where you have several sources, check eligibility source by source against HMRC's current conditions.
TaxSimba's accountant can maintain the agreed records from the information you provide. Ask which recording approach fits your business rather than assuming that being below a threshold removes the underlying work.
Plan for the limit before simplifying categories
Illustrative preparation example.
If turnover is close to the applicable limit, keep enough detail to support fuller categories. A single total may save time today but create reconstruction work if eligibility changes. Check the relevant source and conditions rather than assuming all personal income shares one test.
Check: Could the records still support the required categories if the turnover limit is reached?
| Check | Practical action |
|---|---|
| Which source and turnover test apply? | Check each relevant trade or property business under current HMRC conditions. |
| Are restricted finance costs separate? | Keep residential property finance costs identifiable even where simpler categories are available. |
| Is turnover approaching the limit? | Plan for full categorisation and any required review from the year's start. |
Does simpler categorisation mean fewer records?
No. The level of category detail may change, but complete income, costs and supporting evidence are still needed.
Is this the same as a VAT-registration test?
No. VAT has its own taxable-turnover rules. Do not use a simpler-record category decision to decide VAT registration.
Download a checklist for this guide
- List each income source and expected turnover.
- Check current simpler-category eligibility.
- Identify restricted property finance costs.
- Keep invoices and reconciliation evidence.
- Set a turnover review trigger before the limit is reached.