Foreign taxes in untied - MTD

This article talks about how to account for taxes deducted in a foreign country on income you've earned in that country.

Note that foreign income is supported if you are in MTD. If you are not in MTD, we have only limited foreign income support.

See also the principles of foreign tax treatments.

During the year - accounting as you earn (self-employment and property)

In MTD, untied has two main options for recording foreign taxes that have been taken off the money you receive for self employment or rental property.

Choose the approach that works for you.

Example

€1,250 received from France

This is made up as €1,500 income and €250 withheld in French tax

Option 1: Withholding tax as an income tag (gross‑up method)

This method both:

• Grosses up your income
• Creates a clear memo of tax withheld

Set up the tag

1. Go to Custom rules & tags.
2. Create a new income tag.
3. Name it something like:
   • French tax (withheld)
4. Map it to Business income.
5. Save the tag.

Apply the tag

1. Open the transaction.
2. Tag the main amount received - eg €1,250 as business income
3. Add a new line for the withheld tax:
   • Type: Money in
   • Amount: €250
   • Tag: French tax
4. Save, even if warned that totals exceed the original transaction.

Result

• Income is correctly grossed up to reflect the pre‑tax amount.
• The withheld tax appears separately in Tax transactions.
• You can reference this figure at year end when declaring foreign tax withheld.

Option 2: Withholding tax as a memo expense (no gross‑up)

This approach keeps income and claimed amounts aligned while still recording the tax for reference.

Set up the tag

1. Go to Custom rules & tags.
2. Create a new expense tag:
3. Name it something like:
   • French tax (withheld memo)
4. Map it to Personal (as it is a memo account)
5. Save the tag.

Apply the memo approach

1. Open the transaction.
2. Increase the main business income to reflect the gross amount (eg €1,500).
3. Add a new line:
   • Type: Money out
   • Amount: €250
   • Tag: French tax memo
4. Save the transaction.

Result

• Claimed amount and transaction amount remain the same.
• The tax memo appears in grey in Tax transactions.
• It does not affect your tax return totals directly.
• You can filter for memo items at year end and process them as needed.

Choosing the right approach

Both approaches are valid, and untied supports whichever method fits your accounting process best.

End of year

At the end of the year you will need to apply the right treatment to the withheld tax, and you may need the support of an accountant or tax adviser. This article talks about what foreign tax relief options apply.

Some of this is changing from year to year, so we will update these pages for the end of the year.

You may also want to look at this guidance from HMRC (these are notes for SA106 which is the old form HMRC use - they haven't yet produced something specific for those in MTD. The rules are the same, but you may need help from us in working out where the relevant section is for MTD).