MTD quarterly updates are the core new requirement of Making Tax Digital for Income Tax. Instead of filing one annual Self Assessment return, you’ll send HMRC a summary of your income and expenses every 3 months through compatible software.
During an MTD webinar, attendees had dozens of questions about how quarterly updates work in practice: “Are there penalties for inaccurate MTD quarterly returns?”, “Can you use calendar months system eg 1.4-30.6?”, “Do I need to put invoices into Coconut?”, “How do I record a percentage of utility costs — quarterly or year end?”
Here’s the practical guide to MTD quarterly updates — deadlines, record-keeping, penalties, and how to handle common scenarios.
What Are MTD Quarterly Updates?
According to HMRC’s MTD for Income Tax guidance, a quarterly update is a summary of your business income and expenses for a 3-month period, sent to HMRC through your compatible software.
The update includes:
- Total income for the quarter
- Total expenses for the quarter (categorised if your turnover is over £90,000)
- A summary figure showing your profit for the quarter
The update does not include:
- Individual receipts or invoices (HMRC doesn’t need these uploaded)
- Tax calculations (no tax is due at this point)
- Adjustments like capital allowances or reliefs (these are done at the final declaration stage)
Your software generates the update automatically from your digital records. You review the figures and click submit — the software sends the update to HMRC via API.
When Are Quarterly Updates Due?
You have two options for your quarterly update periods:
Option 1: Tax-year quarters (default)
These follow the UK tax year, which runs from 6 April to 5 April:
| Quarter | Period | Update due by |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
You then have until 31 January of the following year to submit your final declaration (which replaces the annual Self Assessment return).
Option 2: Calendar quarters
If your accounting period ends on 31 March (or another calendar date), you can choose calendar quarters instead. For example:
| Quarter | Period | Update due by |
|---|---|---|
| Q1 | 1 April – 30 June | end of month + 1 month |
| Q2 | 1 July – 30 September | end of month + 1 month |
| Q3 | 1 October – 31 December | end of month + 1 month |
| Q4 | 1 January – 31 March | end of month + 1 month |
Choosing your quarter periods
One webinar attendee asked: “Can you use calendar months system eg 1.4-30.6?”
The answer: Yes, but you must choose before your first quarterly update. You cannot change mid-year. If your accounting period ends on 31 March, calendar quarters make sense. If you’re not sure, stick with the default tax-year quarters.
The choice is made in your software settings. Once you submit your first quarterly update, the periods are locked for that tax year. You can change them for the next tax year.
How to Submit a Quarterly Update
The process is straightforward in most compatible software:
- Keep digital records throughout the quarter — enter income and expenses into your software as they happen (or at regular intervals, e.g., weekly)
- Review your records at quarter-end — check for missing transactions, miscategorised expenses, or errors
- Generate the quarterly update — your software calculates the summary automatically
- Review the summary — check the income and expense totals look right
- Submit — click the submit button in your software. The update is sent to HMRC via API
- Get confirmation — you’ll see a confirmation prompt in your software, and the update will be visible in your “Managing My Income Tax” HMRC online account
One webinar attendee asked: “When the quarterly MTD return is filed, do we get confirmation?”
The answer: Yes — you get a confirmation in your software immediately, and the submission is also visible in your HMRC online account under “Managing My Income Tax.”
Three-Line Accounts: The Simplification Nobody Tells You About
This is the single biggest time-saver in MTD, and it’s barely mentioned anywhere. After the first MTD quarterly deadline on 7 August 2026, a Reddit user who’d spent several days trying to sort their submission wrote:
“Finally stumbled on a simple one called Aligned.tax, that’s when I learned you could do consolidated expenses if your turnover is below £90k. It was a simple way to submit from an Excel spreadsheet, got it done in about 5 mins once I found it.”
Another user responded: “The consolidated expenses thing under £90k catches loads of people out, barely mentioned everywhere and it’s the biggest time saver going.”
Here’s what they’re talking about.
The £90,000 simplified reporting threshold
If your annual turnover from a single income source (self-employment or property) is below £90,000, you can use what HMRC calls three-line accounts — also known as simplified reporting. According to ICAEW’s MTD guidance and HMRC’s digital record-keeping direction:
“Taxpayers can choose to categorise their digital records in less detail if they have total income from self-employment of less than £90,000 before expenses.”
Under simplified reporting, each digital record only needs:
- The date of the transaction
- The amount (income or expense)
- Whether it’s income or an expense — that’s it, no category breakdown
Your quarterly update then becomes just two numbers:
- Total income for the quarter
- Total expenses for the quarter (one consolidated figure, not split by category)
You do not need to tell HMRC how much you spent on travel versus office supplies versus insurance. The total is enough. As MTD.digital explains: “Instead of breaking expenses down into dozens of categories, you report just three figures: total income, total expenses, and net profit.”
Why this matters
The Reddit user who discovered this had spent days trying various software tools (Tide’s MTD service, Sage, ANNA) and sitting through HMRC webinars, all because they thought they needed to categorise every transaction. Once they realised they could submit consolidated figures, the actual submission took 5 minutes from a spreadsheet.
This is the key misunderstanding that makes MTD feel overwhelming: people assume HMRC wants to see every transaction categorised in detail. For most sole traders and landlords (anyone under £90k turnover per income source), they don’t. HMRC gets category totals only — not a line-by-line breakdown of your spending.
Who qualifies
| Your situation | Simplified reporting available? |
|---|---|
| Self-employment turnover under £90,000 | Yes — record income/expense only, no category breakdown |
| Self-employment turnover £90,000 or over | No — must categorise all expenses by type |
| UK property income under £90,000 | Yes — but must still record finance costs separately |
| Multiple income sources, each under £90,000 | Yes for each source individually (the £90k test applies per source, not combined) |
| Multiple income sources, one over £90,000 | Full categorisation for the source over £90k; simplified for the others |
The £90,000 test applies to each income source separately, not your combined total. So if you have £60,000 self-employment income and £40,000 property income, both qualify for simplified reporting — even though your combined qualifying income (£100,000) is well above the MTD mandate threshold.
What happens if your turnover exceeds £90,000 mid-year?
If your turnover goes above £90,000 during the tax year, you need to categorise all digital records for that income source in full from the start of that tax year. As ICAEW notes: “If there is a chance that the limit will be exceeded for an income source, it may be better to decide at the start of the tax year to not use simplified reporting.”
In other words, if you’re close to the threshold, it’s safer to categorise from the start rather than switch mid-year.
The fear about HMRC seeing every transaction
The Reddit thread also surfaced a common fear: “HMRC having granular data about every single transaction filled me with fear, as I felt it was something they could use to harass you with especially if they start using AI to look at patterns.”
This fear is understandable but misplaced for those using simplified reporting. HMRC receives category totals (or just income/expense totals if you’re under £90k), not individual transaction details. They don’t see that you spent £4.50 at Costa Coffee or £12 at WHSmith. They see “total expenses: £1,247” for the quarter.
Even if you’re over £90,000 and categorising, HMRC sees category totals (travel: £X, office costs: £Y) — not individual transactions. The granular data stays in your software, not with HMRC.
What Records Do You Need to Keep?
According to HMRC’s record-keeping requirements for MTD, your digital records must include:
If your turnover is under £90,000 (simplified reporting)
For each transaction, you need:
- The date of the transaction
- The amount (income or expense)
- Whether it’s income or an expense
That’s it. You don’t need to categorise expenses by type (travel, office, etc.) for HMRC’s purposes — though your software may do this automatically for your own benefit. See the three-line accounts section above for the full details.
If your turnover is over £90,000 (full categorisation)
You need fuller categorisation:
- Income type (e.g., sales, rental income)
- Expense category (e.g., travel, office costs, capital allowances)
- Landlords must also record finance costs separately
Do you need to upload invoices?
One webinar attendee asked: “Do I need to put invoices into Coconut?”
The answer: No. HMRC does not require you to upload invoices or receipts. You just need to record the date, amount, and type (income or expense) in your digital records. However, you should still keep your receipts and invoices for your own records — HMRC can ask to see them during an enquiry. Most software lets you photograph and attach receipts to transactions, which is good practice.
Another attendee who used a letting agent asked: “I have passed rentals to a letting agent — they deduct expenses, I don’t get invoices.”
The answer: Just record the dates, income, and expenses as reported by your letting agent. You don’t need the underlying invoices — HMRC only needs the summary data.
Penalties for MTD Quarterly Updates
This was the most common penalty-related question in the webinar: “Are there penalties for inaccurate MTD quarterly returns?”
No penalties for quarterly update inaccuracies
HMRC does not penalise inaccuracies in quarterly updates. The quarterly updates are expected to be based on your best available information at the time — they’re not a formal declaration of accuracy. You correct any errors in your final declaration (the end-of-year return).
This makes sense when you understand the purpose of quarterly updates: they give HMRC a rough picture of your income throughout the year, not a precise tax calculation. If you estimate an expense in Q1 and later find the exact amount, you adjust it in your final declaration.
Penalties that DO apply
According to HMRC’s penalty guidance, penalties apply for:
- Late quarterly updates: A penalty after 3 months of lateness. The amount depends on whether you’ve been late before.
- Late final declaration: Points-based system — you accumulate points for each late submission, and a penalty is issued when you reach the threshold.
- Failure to keep digital records: Penalty of up to £5,000 for deliberate failure to maintain digital records.
- Late payment of tax: Interest on overdue tax plus potential penalties under the new late payment penalty regime.
- Inaccuracies in the final declaration: If your final declaration contains inaccuracies, standard Self Assessment accuracy penalties apply — but not for quarterly updates.
Common Scenarios
Variable income during a quarter
One webinar attendee asked: “I have had four months off over the first MTD quarter — will this raise a red flag?”
The answer: No. HMRC sees summary data only and understands that income varies. If you had no income in a quarter, your quarterly update simply shows £0 income and whatever expenses you incurred. Just keep digital records and send the update as normal.
Apportioning utility costs
One attendee asked: “How do I record a percentage of utility costs — quarterly or year end?”
The answer: Either. You can choose to apportion utility costs (e.g., 20% of your £150/month electricity bill = £30/month business expense) either quarterly or at year-end. If you apportion quarterly, include the apportioned amount in each quarterly update. If you apportion at year-end, include the full amount in your final declaration. Choose one method and be consistent.
For example, if your electricity bill is £180/month and you use 20% for business:
- Quarterly apportionment: £180 × 20% × 3 months = £108 per quarter
- Annual apportionment: £180 × 20% × 12 months = £432 at year-end
No income in a quarter
If you had no business income in a quarter (e.g., you took time off), you still need to send a quarterly update. It will show £0 income and any expenses you incurred (e.g., software subscriptions, insurance). This is normal and won’t trigger any flags.
Multiple income sources
If you have both self-employment income and property income, you send separate quarterly updates for each income source. Your software handles this — you’ll have one set of records for your sole trader business and another for your rental property.
For example, if you earn £40,000 from self-employment and £15,000 from a rental property:
- Quarterly update 1: Self-employment income and expenses
- Quarterly update 2: Property income and expenses
- Final declaration: Combines both with any adjustments
How to Prepare for Quarterly Updates
- Switch to compatible software now — don’t wait until your threshold date. See our MTD software costs guide for options.
- Enter transactions regularly — weekly or daily, not quarterly. This makes the update process a 5-minute review rather than a 3-hour data entry session.
- Keep receipts digitally — photograph them in your software so they’re attached to transactions.
- Review before submitting — always check your quarterly summary before clicking submit. Look for missing transactions, miscategorised expenses, or obvious errors.
- Set reminders for deadlines — the deadlines are 7 August, 7 November, 7 February, and 7 May (for tax-year quarters). Set calendar reminders a week before each.
What the First Deadline Was Actually Like
The first MTD quarterly update deadline landed on 7 August 2026, and the reactions on Reddit ranged from “literally didn’t notice” to “spent several days and dreading doing it three more times a year.” The split tells you exactly what determines whether MTD is a 5-minute job or a weekend lost.
The “didn’t notice” group
People who were already using accounting software with a bank feed found it a non-event:
- “Didn’t really do anything other than click submit on QuickBooks? As a sole trader with a relatively simple business that I can track and categorise stuff myself it doesn’t really seem a big deal.”
- “Easy. Monzo did it all for me, I just had to categorise the various incomes and outgoings, then hit a button and it was done.”
- “Literally didn’t notice, I only remembered it was now compulsory after seeing this post. We’ve been doing everything as digital as possible since we incorporated around 3 years ago.”
- “I just clicked submit. I was dreading it but its very easy.”
The common thread: they were already doing digital record-keeping. MTD didn’t change anything for them — they just had to click one extra button.
The “lost a weekend” group
People who were keeping records manually (spreadsheets, shoeboxes, or not at all) found it a major burden:
- “Tried loads of different tools to get from my Tide .csv data to something I could upload. Tide have a MTD service which was an absolute car crash, Sage was terrible, also tried ANNA and a few more.”
- “I spend several days trying to sort this, which feels like an unfair burden to place on small businesses. I sat through HMRCs awful webinar, did loads of reading, tried various software solutions, had numerous chats with other freelancers.”
- “I seem to be doing ALL of my accountants work by inputting every bit of income and expense into an app, and then having to pay more that i was previously.”
The common thread: they were trying to bolt MTD onto a manual system. The problem wasn’t MTD itself — it was the gap between how they’d been keeping records (or not) and what MTD requires.
What separates the two groups
It’s not income, business complexity, or tech-savviness. It’s whether your bank feeds into your software automatically. As the Reddit accountant who started the thread put it:
“Only thing that seems to help is people who’ve got their bank feeding straight into something, then it’s ten minutes a quarter rather than a weekend. Doesn’t make it less annoying that it exists though.”
If you’re in the “lost a weekend” group, the fix isn’t better MTD software — it’s getting a bank feed set up. See our cheapest MTD software guide for free options that include automatic bank feeds (Tide, FreeAgent (10% off with this link) via Mettle/NatWest, Monzo’s built-in MTD tool, Starling’s accounting features).
The spreadsheet users who found bridging software
A third group kept their spreadsheets and used bridging software to submit:
- “I have all my accounts in excel, and filing both MTD for income tax, and MTD for VAT have been a doddle with Vital Tax’s excel addon.”
- “Couple of tweaks to my excel template and a couple of questions for the accountant and all good.”
If you have a well-organised spreadsheet already, bridging software (VitalTax, 123 Sheets, Acxite) lets you submit without switching to full accounting software. See our cheapest MTD software guide for bridging options from £0-30/year.
The Bottom Line
MTD quarterly updates are not as scary as they sound. If you’re already using accounting software and entering transactions regularly, the quarterly update is just a review-and-submit process that takes a few minutes.
Key things to remember:
- No tax is due at quarterly stages — payment is still due 31 January
- No penalties for quarterly inaccuracies — just do your best and correct at year-end
- No invoices needed — just record dates, amounts, and income/expense type
- If your turnover is under £90,000, you can use simplified reporting — just total income and total expenses, no category breakdown. See the three-line accounts section above
- Choose your quarter periods before your first update — can’t change mid-year
- Submit even if you had no income — £0 income is a valid quarterly update
- Get a bank feed set up — the difference between a 5-minute submission and a lost weekend is whether your bank feeds into your software automatically
For the complete end-to-end filing walkthrough, see our how to file MTD guide. For the complete MTD roadmap, see our Making Tax Digital guide. For the full MTD overview, see Making Tax Digital for income tax explained. For the income threshold rules, see MTD qualifying income thresholds. For choosing software (including free options), see our cheapest MTD software guide.