Do I have to set up a bank? New sole trader here for MTD

Support
1

Hello,

I’m new to QuickFile, here because of MTD. I’m a Sole-Trader, and I sell lots of direct sales through various online marketplaces- my own website, Etsy, eBay, Not On The High Street etc.

Question - do I have to add my business bank account to make this all work?

Background-

Until MTD, I have just done all my own bookkeeping and accounts in Excel files.

I think I have worked out how to upload lists of all these sales as ‘invoices’, and I assume uploading expenses will work the same.

All of these web sales are paid for at the time of purchase (even if the the money isn’t actually paid into my account until 1-2 weeks later depending on the platform).

As instructed I uploaded a CSV with the mandatory fields:

Issue date | Client name | Description | Total gross amount

That seemed to work, except each invoice is then showed as unpaid. So I added:

Paid date

But then it’s not working because I don’t have a “Paid bank account nominal code”

All I want is to be able to upload all my sales and expenses data, so that it can be submitted to HMRC for MTD. I don’t need all the other integration, and I don’t really want to connect a bank account.

Can I create a dummy bank account? Does it matter if this doesn’t actually match up to my HSBC account?

Thanks for your help!

2

Hello @ManuscriptMaps

You don’t need to connect a bank account

There are already default bank accounts set up in the software.

You can view their nominal codes by

Viewing a bank
Options > Settings

You can then use this code on your import along with the other fields

Issue date | Client name | Description | Total gross amount  | Paid Date |Paid bank account nominal code
3

Right ok, thanks! So if a bank account is not actually connected, these accounts are just for tracking the figures, but they can be used or ignored without it affecting anything?

4

Hello @ManuscriptMaps

Correct, but its worth noting (for anyone else reading this thread) that if you are on a cash basis the payment dates matter as that it the tax point

The MTD ITSA reports will look at the payment (in the banking screen rather than the invoice)

But as you mention “All of these web sales are paid for at the time of purchase” so in your case this would not matter

5

Thanks. Right, ok, so the banking figures also form the MTD report and reflect the payments in and payments out? A few more questions then as a sole trader using cash basis:

1.) Regarding an e-commerce sale (e.g. from Etsy or Not On The High Street). In all my past bookkeeping/accounting I have recorded these as paid for on the date of purchase, and all their commission fees for the transaction under expenses on that same date of purchase. However, Etsy, NOTHS etc don’t actually release that money to me until 1-2 weeks later. If I don’t have a bank account formally connected, does that matter, as long as I record it as income on the date the customer purchased it? All I can see is that theoretically any money owed but not yet paid at the end-of-year cutoff date might not technically need to be taxed until the following year, but so what? HMRC would be getting tax on that money early.

Or, would it be better instead - now that I have to use this system - to only record as income each remittance from Etsy, eBay, Stripe (for my website), NOTHS, Amazon etc. and not record as income every customer purchase? In that case, since Etsy, NOTHS, eBay etc. keep their fees and commissions and it’s never part of the remittance, technically that money never went into my bank account. Do I just ignore that since it was never paid to me to be paid back to them?

What it seems to boil down to is: if a customer buys an item from an e-commerce shop, when is that money legally mine for tax purposes? On the date the customer purchased it, or when it’s remitted into my bank account? What about purchases on my own website, the money of which is held by Stripe for remittance (minus card fees) a week later? If the money isn’t actually mine until it’s paid into my account, how do you record the fees and commissions that the e-commerce shop withheld, since they were never paid to me in the first place?

2.) If I’m using a bank “current account” here that’s not connected to my actual account (all it’s doing is recording money in and money out), is it fine for this to actually be a combination reflecting my real business bank account plus my PayPal account? Some people purchase on my website and use PayPal, and that payment (minus fees) goes straight into that account. Occasionally I withdraw from it, or make expense purchases from it. For all intents and purposes it works exactly the same as a current account, so does it need to be recorded separately? I’m sure for ‘good practice’ accountants will say “yes”, but for MTD, as a sole trader, does it matter? It’s a lot of extra work.

In other words, for sole traders using cash basis, can that ‘current account’ just be all we use to show money in and money out, even if in real life that money is sitting in different accounts?

3.) As a cash basis sole trader, do I need to record withdrawals from that current account to pay myself into my personal account?

Thanks for all the help! Best,

Kevin

6

Hi @ManuscriptMaps,

The way I’d approach it is as follows.

1. Treat each marketplace separately

For simplicity, I’d set up each marketplace (Amazon, Etsy, NOTHS, eBay, etc.) as its own client in QuickFile, along with its own holding bank account.

These holding accounts aren’t real bank accounts—they simply represent money that the marketplace is holding on your behalf until it’s paid out. Keeping each marketplace separate also gives you a much clearer audit trail should you ever need to reconcile figures or answer any HMRC queries.

2. Think of each sale as three separate transactions

Although it feels like a single sale, there are actually three financial events taking place:

  1. The sale – the full selling price (e.g. £10.00). This is your sales income and would be recorded against your sales invoice(s).

  2. The marketplace fees – for example £1.75. These are a business expense and should be recorded against the fee invoice or statement provided by the marketplace (often monthly).

  3. The payout – the remaining balance (e.g. £8.25) that is transferred to your current account or PayPal.

This also answers your question:

In that case, since Etsy, NOTHS, eBay etc. keep their fees and commissions and it’s never part of the remittance, technically that money never went into my bank account. Do I just ignore that since it was never paid to me to be paid back to them?

No. Although the fee never physically reaches your bank account, it still forms part of the transaction. The marketplace has simply deducted its fee before sending you the balance. Recording the sale, the fee and the payout separately gives you an accurate set of accounts and a complete audit trail.

3. Reconcile the payout

When the marketplace pays you, record that payment as a transfer from the relevant marketplace holding account into your real current account (or PayPal if that’s where the money is paid).

This keeps your QuickFile bank accounts matching what actually happened.

Putting it all together

My workflow would be:

  • Import your sales and mark them as paid into the relevant marketplace holding account.

  • Enter the marketplace’s fee invoice or statement and mark that as paid from the same holding account.

  • Reconcile your real bank account (or PayPal) by recording the marketplace payout as a transfer from the holding account.

The result is that each marketplace account naturally clears down to zero as money flows through it.

As for when the income becomes yours, for most businesses using traditional accounting, HMRC would generally regard the income as arising when you’ve completed the sale (typically when the goods are dispatched), rather than when Amazon or Etsy transfers the funds to your bank account. The marketplace is simply holding money that belongs to you until it’s paid out.

That said, I’m not an accountant, and there are exceptions (for example, cash basis accounting or certain VAT situations), so if you’re unsure it’s always worth checking with your accountant.

7

For cash accounting VAT you must use the date that the customer made the card payment, not when the provider paid it out to you - it is spelled out in full at Cash Accounting Scheme (VAT Notice 731) - GOV.UK

If you are paid by credit or debit card: you receive payment on the date you make out a sales voucher for the payment (not when you actually receive payment from the card provider).

For cash basis income tax there’s a bit more flexibility - according to Cash basis: How to record income and expenses - GOV.UK

You can choose how you record when money is received or paid (for example, the date the money enters your account or the date a cheque is written), but you must use the same method each tax return.

Personally I think your current approach of treating it as paid when the customer pays the platform rather than when the platform pays you still makes more sense, and is consistent with the way you must do it if you’re VAT registered. The only time it would make a noticeable difference anyway is if you made a big sale through one of these platforms at the end of March but only received the payout in mid April. You’d still owe the tax on this sale in the end anyway, but it’d change which year.

8

Thanks very much @QFMathew ! That makes a lot of sense and that’s what I will set up.

This might be worth turning into a ‘good practice for sole trader marketplace sellers’ guide in the Support pages. I’m sure there are other people like me who are cash basis sole traders, who have been supplying HMRC a basic money in / money out spreadsheet for their taxes, which isn’t really going to cut it anymore with MTD. But, like me, also don’t really want to spend the income to hire an accountant or bookkeeper.

Thanks again!

9

Thanks very much @ian_roberts . That makes sense, and that was how I understood it generally - as soon as the purchase is made, that money is yours for tax purposes, even if it’s not paid into your bank account for a week or two.

I assume direct invoices are different (e.g. a net-30 invoice to be paid), in that the money isn’t yours until the payment is made because there’s every chance it won’t be paid on time, if at all.