MTD Quarterly Updates: What to Report and When

A quarterly update is a summary of your business income and expenses for a three-month period, submitted to HMRC through MTD-compatible software. Critically, you are not sending individual transactions. You are sending category totals. If you had 47 expense transactions for travel during Q1, HMRC receives one figure: total travel expenses for Q1. Your software calculates these totals from your records and submits them. The update is not a tax calculation. HMRC is not working out your tax liability from quarterly updates. The purpose is to give HMRC a running picture of your income and expenses throughout the year, and to give you a better understanding of your tax position as the year progresses. You do not need to pay any tax with your quarterly update. Payment dates for Self Assessment remain unchanged (31 January and 31 July). Quarterly updates are reporting obligations only. Think of it like weighing yourself weekly rather than once a year. The weigh-in does not change anything — it just gives you more frequent data to work with.

Each quarterly update includes two main components: **1. Income** — The total income received (or invoiced, depending on your accounting method) during the quarter, broken down by HMRC's income categories. **2. Expenses** — The total expenses incurred during the quarter, broken down by HMRC's expense categories. Your MTD software will present these categories for you and calculate the totals from your recorded transactions. You confirm the figures are correct and submit. If you have both self-employment income and property income, you submit separate summaries for each income source. A self-employed plumber who also rents out a flat would submit two sets of figures in each quarterly update. You do not need to include: - Individual transaction details - Copies of receipts or invoices - Bank statements - Capital expenditure (this goes in the Final Declaration) - Personal expenses However, you must keep the underlying records (receipts, invoices, bank statements) digitally for at least 5 years and 10 months after the tax year end, in case HMRC queries your figures.

For self-employment income, HMRC requires you to report under these categories: - **Turnover** — Your total business income from sales of goods or services - **Other business income** — Any other income related to the business (e.g., commission, tips, grants) Most sole traders will only use the Turnover category. The split between turnover and other income matters for certain tax calculations, so categorise accurately. If you use the cash basis of accounting, report income when you receive payment. If you use the traditional accruals basis, report income when you invoice (regardless of when you are paid).

HMRC requires self-employment expenses to be categorised under these standard headings. Your MTD software will use these categories:

If you have UK property income, HMRC uses different categories:

The MTD tax year is divided into four quarters that align with the standard UK tax year (6 April to 5 April):

How you record income and expenses in your quarterly updates depends on which accounting method you use. **Cash basis** (most common for sole traders): - Record income when you receive payment - Record expenses when you pay them - Simpler to manage — matches your bank statements - Available if your gross income is under £150,000 - Default method for sole traders since April 2024 **Traditional accruals basis**: - Record income when you invoice (even if not yet paid) - Record expenses when you incur them (even if not yet paid) - More complex — requires tracking debtors and creditors - Required for partnerships and those over £150,000 income - Gives a more accurate picture of business performance For most sole traders and landlords, the cash basis is the right choice. It is simpler, matches what you see in your bank account, and is now the default. You only need to opt for the accruals basis if you have specific reasons (e.g., you want to claim relief on bad debts, or you have significant work in progress). Your MTD software will handle the accounting method for you — just make sure you tell it which method you are using when you set up.

Quarterly updates are not final. If you realise that your Q1 figures were incorrect — perhaps you missed an expense or double-counted some income — you can correct this in subsequent quarterly updates or in your Final Declaration. HMRC expects reasonable accuracy in quarterly updates but recognises that they are in-year estimates based on available information. You are not expected to have finalised accounts at the quarterly stage. Specifically: - **Minor corrections**: Adjust in the next quarterly update. If you forgot a £50 expense in Q1, include it in Q2. - **Significant corrections**: Your MTD software should allow you to amend a previously submitted quarterly update. If a large invoice was categorised incorrectly, amend the relevant quarter. - **Year-end adjustments**: The Final Declaration is where you finalise everything. Capital allowances, pension contributions, loss relief, and other annual adjustments go here. The key principle: quarterly updates get your figures roughly right throughout the year. The Final Declaration makes them exactly right. Do not stress about perfection in quarterly submissions — accuracy is more important than precision at this stage.

After your four quarterly updates, you must submit a Final Declaration by 31 January following the end of the tax year. This replaces the traditional Self Assessment tax return. The Final Declaration is where you: - **Confirm or adjust** your quarterly figures for the full year - **Add income from other sources** — employment, dividends, savings interest, pensions - **Claim capital allowances** — for equipment, vehicles, and other capital expenditure - **Claim tax reliefs** — pension contributions, charitable donations, loss relief - **Declare other information** — student loan repayments, High Income Child Benefit Charge, etc. - **Calculate your final tax liability** for the year The Final Declaration is more comprehensive than quarterly updates. While quarterly updates cover business income and expenses only, the Final Declaration covers your complete tax position for the year. For the 2026/27 tax year, your Final Declaration is due by 31 January 2028. This deadline carries full Self Assessment penalties — unlike quarterly updates in the soft landing year, there is no leniency on the Final Declaration deadline. Your MTD software will guide you through the Final Declaration process, pulling in your quarterly data and prompting you for additional information needed to complete the return.