MTD Quarterly Updates: What to Include and How to Submit Your First Return

Making Tax Digital for Income Tax starts on 6 April 2026, and if you're a sole trader or landlord with qualifying income over £50,000, you need to submit quarterly updates to HMRC instead of one annual Self Assessment.

The good news? Quarterly updates are far simpler than most people expect. The bad news? HMRC's guidance is scattered across dozens of pages and written in impenetrable civil service English.

This guide cuts through the noise. Here's exactly what you need to include, when to submit, and how to file — step by step.

Table of Contents

• What is an MTD Quarterly Update?
• Who Needs to Submit Quarterly Updates?
• What Information to Include
• The Three-Line Account Option
• Quarterly Deadlines Calendar
• How to Submit: Step-by-Step Process
• Which Software to Use
• Common Mistakes to Avoid
• What Happens After Your Quarterly Updates
• The Year One Grace Period
• Frequently Asked Questions

What Is an MTD Quarterly Update?

An MTD quarterly update is a digital summary of your business income and expenses for a 3-month period, submitted to HMRC through compatible software.

Think of it as a simplified snapshot of your finances — not a full tax return. You're telling HMRC: "Here's what I earned and spent this quarter."

Key differences from Self Assessment:

• Quarterly updates are summaries, not detailed breakdowns
• You submit four times a year instead of once
• Everything must be done through MTD-compatible software (no paper, no HMRC online portal)
• You still file a final declaration at year end (similar to current Self Assessment)

The quarterly updates are cumulative — each one builds on the last. HMRC uses them to give you a running estimate of your tax bill, so there are no nasty surprises in January.

Who Needs to Submit Quarterly Updates?

From 6 April 2026, you must submit quarterly updates if:

• You're a sole trader or landlord (or both)
• Your qualifying income exceeds £50,000 per year

Qualifying income means your gross income from self-employment and/or property — before expenses. It's turnover, not profit.

Who's NOT included (yet):

• Partnerships (expected from April 2027 at earliest)
• Limited companies (no confirmed date)
• Sole traders/landlords under £50,000 (until April 2027 when the £30K threshold kicks in)

What Information to Include in Your Quarterly Update

This is where most of the confusion lies. Here's the definitive answer:

Standard Quarterly Update

For each quarter, you need to report:

Category	What to Include	Example
Total Income	All business income received in the quarter	£15,000 from client invoices
Total Expenses	All allowable business expenses in the quarter	£3,200 in materials, travel, software

That's it for the basic quarterly update. Total income, total expenses. Your software calculates the net profit.

What You DON'T Need to Include Quarterly

• Individual transaction details (these stay in your digital records)
• Receipts or invoices (keep them, but don't submit them)
• Capital allowance claims (these go in your final declaration)
• Personal allowance calculations
• Tax payment amounts

What You DO Need to Keep Digitally

While the quarterly submission is a summary, your underlying digital records must include:

• Date of each transaction
• Amount
• Brief description
• Category (income or expense type)

HMRC can request to see these records at any time. Your software should be maintaining them automatically as you enter transactions.

The Three-Line Account Option

If your turnover is under £85,000 (the VAT threshold), you can use the three-line account approach for your quarterly updates. This means you submit just three figures:

1. Total turnover (gross income)
2. Total expenses
3. Net profit (turnover minus expenses)

You don't need to break expenses down into categories (travel, materials, office costs, etc.). The three-line approach is the simplest way to comply with MTD.

If your turnover is over £85,000, you'll need to provide a more detailed breakdown of expenses by category in your submissions.

Quarterly Deadlines Calendar (2026/27)

Your first MTD year runs from 6 April 2026 to 5 April 2027. Here are all the key dates:

Quarter	Period Covered	Submission Deadline
Q1	6 April – 5 July 2026	5 August 2026
Q2	6 July – 5 October 2026	5 November 2026
Q3	6 October – 5 January 2027	5 February 2027
Q4	6 January – 5 April 2027	5 May 2027
Final Declaration	Full 2026/27 tax year	31 January 2028

Each quarterly update must be submitted within one month and one day of the quarter ending. So for Q1 (ending 5 July), you have until 5 August.

How to Submit: Step-by-Step Process

Step 1: Sign Up for MTD for Income Tax

Before you can submit anything, you need to register for MTD ITSA:

1. Log into your Government Gateway account
2. Search for "Making Tax Digital for Income Tax" in your account services
3. Follow the sign-up process (you'll need your UTR and National Insurance number)
4. HMRC will confirm your enrolment (this can take a few days)

Do this in March 2026. Don't leave it until April — the sign-up queue will be long and issues take time to resolve.

Step 2: Connect Your Software to HMRC

Your MTD-compatible software needs to be authorised to communicate with HMRC:

1. In your accounting software, find the MTD settings or HMRC connection section
2. Click "Connect to HMRC" — you'll be redirected to Government Gateway to grant permission
3. Log in and authorise the connection
4. Your software is now linked and can submit returns directly

Step 3: Record Your Transactions Digitally

From 6 April 2026 onwards, every business transaction must be recorded digitally:

• Income: Log every payment received (amount, date, client/source)
• Expenses: Log every business expense (amount, date, description, category)

If your software has bank feeds (automatic import from your bank account), most of this happens automatically. You just need to categorise transactions.

Step 4: Review and Submit Your Quarterly Update

When the quarter ends:

1. Open your accounting software
2. Navigate to the MTD submission or quarterly update section
3. Review the summary figures (total income, total expenses, net profit)
4. Check for any uncategorised or missing transactions
5. Click Submit to HMRC
6. Save or screenshot the confirmation for your records

The actual submission takes seconds — your software sends the data digitally. HMRC will then show you an estimated tax position based on your cumulative quarterly updates.

Step 5: The Final Declaration (Year End)

After all four quarterly updates, you file a final declaration by 31 January of the following year. This is similar to your current Self Assessment — you can:

• Adjust any figures from your quarterly updates
• Claim capital allowances
• Report any other income (employment, dividends, etc.)
• Apply reliefs and allowances
• Confirm your final tax liability

Which Software to Use

You must use HMRC-recognised MTD-compatible software. The main options:

Software	Price	Best For
HMRC Free Software	Free	Very basic sole traders, minimal transactions
FreeAgent	£14.50/month (free with NatWest/RBS)	Freelancers, consultants, simple businesses
Xero Starter	£15/month	Sole traders who want bank feeds and invoicing
QuickBooks Simple Start	£10/month	Budget-conscious, basic bookkeeping
Sage Accounting	£12/month	Those already using Sage products
Bridging Software + Spreadsheet	Free–£50/year	Spreadsheet experts who refuse to change

For a detailed comparison, see our guide: MTD Software: Free vs Paid Options Compared (2026)

Common Mistakes to Avoid

1. Waiting Until April to Sign Up

The HMRC sign-up process isn't instant. Technical issues, verification delays, and software connection problems all take time. Start the process in March 2026 so you're ready from day one.

2. Confusing Digital Records with Quarterly Submissions

You need digital records of every transaction. But you only submit summary totals quarterly. Don't think "I only need to log things four times a year" — record as you go.

3. Not Recording Cash Transactions

If you receive any payments in cash, they still need to be recorded digitally. This catches out tradespeople and market sellers in particular.

4. Mixing Personal and Business Expenses

A separate business bank account makes MTD dramatically easier. If you're using one account for everything, categorising transactions becomes a nightmare.

5. Ignoring the Estimates

After each quarterly update, HMRC shows you an estimated tax liability. Pay attention to this. It's your early warning system — use it to set aside the right amount each quarter rather than facing a shock in January.

6. Forgetting About the Final Declaration

Four quarterly updates don't replace your annual tax return. You still need to file a final declaration by 31 January. This is where you claim capital allowances, adjust figures, and confirm your final position.

What Happens After Your Quarterly Updates

Once HMRC receives your quarterly update, several things happen:

1. Running tax estimate: HMRC calculates your estimated tax position based on all updates submitted so far. This updates cumulatively through the year.
2. Record confirmation: Your submission is logged against your tax account. You can view the status in your software or Government Gateway.
3. No immediate payment: You don't pay tax with each quarterly update. Tax payment dates remain the same as current Self Assessment (31 January and 31 July for payments on account).

The quarterly updates are about information flow, not tax payment. The payment schedule stays the same — you're just giving HMRC visibility throughout the year instead of one annual dump.

The Year One Grace Period

HMRC has confirmed a penalty grace period for the 2026/27 tax year:

• No late submission penalties for quarterly updates submitted late in the first year
• No late payment penalties for the first year
• Interest on late payments still applies (currently ~7.5%)

This means if you're a bit slow getting started or miss a quarterly deadline, you won't be fined. But you should still aim to submit on time — it's a habit you need to build for year two when penalties do apply.

For full details on the grace period: MTD Penalty Grace Period Explained

Frequently Asked Questions

Can I correct a quarterly update after submitting it?

Yes. You can make adjustments in subsequent quarterly updates or in your final declaration. The quarterly updates are estimates, not final figures.

What if I have both self-employment AND rental income?

You submit separate quarterly updates for each income source. Your software should handle this — you'd set up self-employment and property as separate categories.

Do I still need to file Self Assessment?

The final declaration replaces the Self Assessment return for your business/property income. But if you have other income (employment, dividends, capital gains), you may still need to report those through the final declaration.

What if I use the cash basis?

Cash basis works fine with MTD. You record income when received and expenses when paid — the same as now. The quarterly update just summarises those figures.

Can my accountant submit for me?

Yes. Your accountant can be authorised as an agent and submit quarterly updates on your behalf. Many accountants are offering this as an add-on service.

What happens if my income drops below £50,000?

Once you're in MTD, you generally stay in it even if your income drops. You can apply to leave if your circumstances change significantly, but the default is that you continue quarterly reporting.

Next Steps

MTD quarterly updates aren't the nightmare people fear. The process is genuinely simple once your software is set up — most updates take under 10 minutes.

The critical action right now: sign up for MTD ITSA and connect your software before April. Everything else flows from there.

Related Reading

• All MTD Quarterly Deadlines for 2026/27
• MTD Software: Free vs Paid Options Compared
• MTD Penalty Grace Period Explained
• MTD Last-Minute Setup Guide (March 2026)
• Got an HMRC MTD Letter? What to Do Next
• Free MTD Readiness Checker Tool