MTD quarterly updates: how they work, what to send and how to avoid penalties

If you are a sole trader or landlord with income over £50,000, you are now sending HMRC quarterly updates, and from April 2027 and April 2028 many more people will follow. The idea is easy to state: instead of reporting once a year, you send a small update every quarter. In practice, people have questions about what exactly to send, how detailed it needs to be, what happens if they get it wrong and how it affects their tax. This article answers them.

What a quarterly update is

A quarterly update is a summary of your income and expenses for a three-month period, submitted through Making Tax Digital compatible software. It reports totals under HMRC's income and expense categories, not individual transactions. HMRC uses the updates to give you a running view of your tax position during the year, rather than a surprise at the end.

It is not a tax return and it is not a bill. Your tax is calculated when you make the final declaration after the end of the tax year. Our complete Making Tax Digital guide explains the whole system.

The deadlines

For the standard quarters, each update is due one month after the quarter ends.

Quarter	Period	Update due
1	6 April to 5 July	7 August
2	6 July to 5 October	7 November
3	6 October to 5 January	7 February
4	6 January to 5 April	7 May

If you prefer, you can elect to use calendar quarters instead, which end on 30 June, 30 September, 31 December and 31 March, with updates due a month later. Calendar quarters can be easier because they line up with how most people think about months, and with VAT quarters in some businesses.

The final declaration is due by 31 January following the end of the tax year.

What you actually submit

For each business, you report totals for the quarter in HMRC's categories.

Income. Total turnover, plus any other business income.

Expenses. Totals under headings such as cost of goods, construction industry payments, wages and staff costs, car, van and travel, premises, repairs, admin costs, advertising, interest and bank charges, professional fees, depreciation or other expenses. You can choose to report them in a consolidated single figure if your turnover is below the VAT threshold, which simplifies reporting.

Property income. Landlords report rental income and expenses separately from trading, with their own categories.

Your software calculates these totals from your records and submits them. If your bookkeeping is up to date, a quarterly update takes minutes.

The end of period statement and final declaration

After the tax year ends, you complete two further steps.

End of period statement. For each business, you confirm that the information is complete and correct and make any accounting adjustments, such as capital allowances, balancing charges and accruals. This is where the quarterly totals become the final profit figure.

Final declaration. You confirm your total income for the year, including income from sources outside the business, such as employment, dividends and savings. HMRC then calculates your tax. This replaces the traditional Self Assessment return for people in MTD.

How quarterly updates affect your tax

They do not create payments by themselves. Tax payments are still due on the existing schedule, with payments on account where applicable and a balancing payment at 31 January. What changes is visibility: after each update, HMRC can show you an estimate of your year-to-date tax, which helps you set money aside. Use our sole trader tax calculator to estimate your bill from your profit.

Mistakes and corrections

You are allowed to correct mistakes. If you discover an error in a previous quarter's update, you can correct it in a later update or in the end of period statement. You do not have to resubmit old quarters. What matters is that the final figures at year-end are right. This relaxes the pressure of quarterly reporting, but it does not mean you can be careless: HMRC expects reasonable care, and repeated or deliberate errors can still lead to penalties.

Penalties for late updates

HMRC uses a points-based system for late submissions. Each missed deadline earns a penalty point. When you reach the points threshold, you receive a financial penalty, and further late submissions can attract more. Points expire after a period of compliance. Late payment of tax has a separate regime of interest and penalties. Because rates and thresholds can change, check the current rules on GOV.UK. The easiest protection is to file early.

A realistic quarterly routine

Here is a routine that takes about an hour a quarter if you keep your books current.

1. Week before quarter end. Reconcile the bank and clear uncategorised items.
2. Quarter end. Run a profit and loss for the period and check it looks sensible.
3. First two weeks after. Attach missing receipts, review unusual items and submit.
4. After submitting. Note your estimated tax and move money into a tax savings pot.

Our free monthly checklist shows the monthly jobs that make the quarterly one easy.

What if you have more than one business?

You send updates for each source of business income. A sole trader with two businesses, or someone with a business and a rental property, will submit separate updates. Software handles this by treating each as its own income source. Landlords with several properties usually combine them as one UK property business, with separate reporting for overseas property.

What if you are close to the threshold?

If your qualifying income is near the £50,000, £30,000 or £20,000 thresholds, check your figures carefully and plan ahead. Moving to proper accounting software before your MTD start date gives you time to practise without pressure. Our Making Tax Digital checker tells you whether and when you are in scope.

Choosing software for quarterly updates

Your software must be able to submit the updates to HMRC, hold digital records and handle your type of income. Xero, QuickBooks, FreeAgent and Sage all have compatible products. Some lower-cost tools are aimed specifically at sole traders and landlords. See our guide to choosing accounting software.

Who can do the updates for you

You can submit updates yourself, or your bookkeeper or accountant can prepare and submit them as your agent, with your authorisation. At Bookkeeping Services we keep your records current, prepare each quarter's figures for your approval and make sure your year-end figures are ready. See our Making Tax Digital bookkeeping service. It adds about an hour a quarter to your monthly bookkeeping, at £15 an hour.

Common mistakes to avoid

• Waiting until the deadline week to start
• Mixing personal and business transactions
• Forgetting to categorise transactions
• Ignoring property income that is separate from trading
• Assuming quarterly updates replace tax payments
• Not saving for tax between updates

Frequently asked questions

Do quarterly updates replace Self Assessment payments?

No. Payments follow the existing schedule. The updates give you a running estimate, and the final declaration determines the tax.

Can I fix an error in an earlier quarter?

Yes, through a later update or the end of period statement. You do not have to resubmit the old quarter.

How detailed must an update be?

It reports totals by category, not individual transactions. Small businesses can use simplified consolidated expenses.

Is a missed update penalised?

Missed updates earn penalty points, and enough points trigger a financial penalty. File early to be safe.

Can you submit them for me?

We prepare the figures and keep your records current. Get an instant quote to see the cost.