Making Tax Digital – Quarterly Updates: What, when and how? 

Making Tax Digital is set to transform how self-employed individuals and landlords report their income.  

A key part of Making Tax Digital for Income Tax Self Assessment (ITSA) is the introduction of quarterly updates. These updates change how often information is sent to HMRC, helping to create a more up‑to‑date picture of your income across the tax year.

If Making Tax Digital applies to you, it is important to understand exactly what these quarterly updates involve, when they need to be filed, and how to best prepare for it. 

What are quarterly updates?

Quarterly updates are digital summaries of your income and expenses, submitted to HMRC every three months using MTD‑compatible accounting software, such as Xero.

Alongside these quarterly submissions, you’ll also need to complete a final digital tax return each year. This works in a similar way to the current Self Assessment process and confirms your overall tax position once all adjustments have been made.

Each quarterly update will include:

• Business or property income received in the quarter.
• Allowable expenses incurred
• Any other relevant financial information tracked digitally

If you are an individual with both a sole trade and a property rental, you will need to provide separate quarterly updates for each trade or rental. 

It’s important to note that these updates will not calculate your final tax bill. Instead, they are in place to allow HMRC to see a more accurate, up‑to‑date view of your income as the year progresses. For you, this means greater visibility over your likely tax liability, helping you plan and prepare rather than facing surprises at year end.

When are quarterly updates due? 

Quarterly updates will follow the tax year (6 April to 5 April) although you can choose to use calendar quarters if you prefer.

Each submission will need to be submitted by the 7^th of the month following the quarter-end, as shown below: 

• Q1: 6^th April – 5^th July → due by 7^th August 

• Q2: 6^th July – 5^th October → due by 7^th November 

• Q3: 6^th October – 5^th January → due by 7^th February 

• Q4: 6^th January – 5^th April → due by 7^th May 

This means you will make four submissions each tax year, in addition to a final end-of-year digital tax return that confirms your overall position once all accounting and tax adjustments are made. This final tax return will be due for filing by the 31^st January following the end of the tax year. 

How to submit quarterly updates:

Quarterly updates must be submitted using a HMRC approved accounting software. One recognised cloud accounting platform that we highly recommend is Xero. Here’s why: 

• Fully Making Tax Digital compliant: Xero is approved by HMRC for both VAT and ITSA under Making Tax Digital. 

• 24/7 Digital record and bookkeeping: With access to your accounts 24/7, you can categorise transactions in line with HMRC requirements, whilst digitally storing invoices and receipts alongside the relevant transaction. 

• Quarterly update submission: Xero will generate and submit quarterly updates directly to HMRC through their built-in submission features. 

• Collaboration: Both you and your accountants can access your accounts simultaneously. 

While this may initially feel like additional administration, the software automates much of the process. Once your bank feeds and expenses are set up, preparing a quarterly update typically involves just a brief review before submission.

What happens if I don’t submit a quarterly update?

Under HMRC’s revised penalty system, missing a submission deadline, including quarterly updates or end‑of‑year returns, results in a penalty point.

• Each missed deadline adds one penalty points
• Once a specific threshold of points is reached, a £200 penalty is applied automatically
• After this threshold, every late submission triggers an immediate £200 penalty, with no additional points added

To reset your penalty position, you must show a full year of compliance. This means submitting all required updates on time and ensuring all returns due in the previous 24 months have been filed.

This system is designed to encourage consistent compliance, rather than penalise occasional mistakes.

Next steps:

If Making Tax Digital applies to you, taking action now can make the transition far smoother:

Step 1: Choose your software

It is important to not only choose a software that is HMRC compliant but also is the right software for your

Step 2: Get into the habit

Start tracking your income and expenses digitally even before the rules apply. This way, the digital shift won’t feel too different to your current processes.

Step 3: Plan for deadlines

Note the quarterly dates and set reminders to avoid late submissions.

Step 4: Seek advice if needed

We can help with setup and provide ongoing support to take the burden off your hands.