Quarterly Reporting Under MTD: A Step-by-Step Walkthrough

One of the biggest changes under Making Tax Digital for Income Tax Self Assessment is the shift from a single annual return to four quarterly updates plus a final declaration. For many sole traders and landlords, this is unfamiliar territory. This guide walks you through exactly what quarterly reporting involves, what data HMRC expects, and how to stay on top of every deadline without breaking a sweat.

What Exactly Is a Quarterly Update?

A quarterly update is a digital summary of your business income and expenses for a three-month period. Unlike the old annual Self Assessment return, these updates give HMRC a rolling picture of your financial position throughout the tax year. Think of them as progress reports rather than a final exam.

Each quarterly update is not a mini tax return. You are not calculating your tax liability each quarter. Instead, you are simply reporting the total income received and expenses incurred during that period. HMRC uses this data to build an estimated tax position for you, which you can then review in your software or personal tax account.

What Data Does HMRC Require Each Quarter?

HMRC requires you to report your business income and expenses broken down into specific categories. For each quarterly period, you must submit totals for the following:

Income Categories

• Turnover: Total sales or fees received from your trade or profession
• Other business income: Any other income related to your business (e.g., commission, tips, insurance proceeds)

Expense Categories

• Cost of goods sold: Materials, stock, and direct costs of providing your service
• Construction industry deductions: CIS deductions if applicable
• Staff costs: Employee wages, salaries, NICs, pension contributions
• Travel costs: Business travel, fuel, vehicle hire, parking
• Premises costs: Rent, rates, utilities, insurance for business premises
• Repairs and maintenance: Equipment and property repairs
• General administrative expenses: Phone, internet, stationery, postage
• Advertising and marketing: All promotional and marketing costs
• Interest and bank charges: Loan interest and bank fees
• Professional fees: Accountancy, legal, and other professional service costs
• Depreciation and losses: Capital allowances (reported separately in EOPS)
• Other expenses: Any allowable expense not covered above

2026/27 Quarterly Deadline Calendar

For the first full MTD tax year (6 April 2026 to 5 April 2027), here are the exact quarterly periods and their submission deadlines:

Step-by-Step: Submitting a Quarterly Update

Here is the exact process you will follow each quarter using MTD-compatible software like DIY Tax Return:

Step 1: Ensure Records Are Up to Date

Before submitting, review your digital records for the quarter. Make sure all invoices issued, payments received, and expenses incurred during the period have been entered. If you use bank feed integration, check that all transactions have been categorised correctly.

Step 2: Review the Summary

Your software will generate a quarterly summary showing your total income and total expenses broken down by the HMRC categories listed above. Review each line item carefully. Check that no personal expenses have been accidentally included and that no business expenses have been missed.

Step 3: Confirm and Submit

Once you are satisfied with the figures, confirm the submission in your software. The software will transmit the data directly to HMRC via their MTD API. You will receive a confirmation receipt with a unique submission ID. Save this for your records.

Step 4: Review Your Tax Estimate

After submission, HMRC will update your estimated tax position in your personal tax account. You can also view this through your software. This shows your estimated income tax and National Insurance liability based on the data submitted so far.

Step 5: File Away and Set a Reminder

Note the submission date and reference number. Then set a reminder for the next quarter's deadline. With DIY Tax Return, reminders are sent automatically via email and in-app notifications 14 days and 3 days before each deadline.

What Happens If You Miss a Quarterly Deadline?

HMRC operates a points-based penalty system for late quarterly submissions. Here is how it works:

1. First missed deadline: You receive 1 penalty point. No financial penalty yet.
2. Second missed deadline: You receive another point, bringing your total to 2. Still no financial penalty.
3. Third missed deadline: You reach 3 points. Still no financial penalty, but you are one point away from the threshold.
4. Fourth missed deadline: You hit 4 points — the threshold for quarterly filers. A £200 penalty is charged, and every subsequent late submission also incurs £200.

Points expire after 24 months of clean compliance (all submissions made on time). The slate is wiped clean and you start again from zero points.

How Corrections Work

Made a mistake in a quarterly update? Do not panic. HMRC has built flexibility into the system:

• Within the same quarter: Simply resubmit the quarterly update with the corrected figures. The new submission replaces the previous one entirely.
• After the quarter has closed: You can amend a previously submitted quarter at any point before the final declaration (EOPS). Your software will let you reopen and resubmit the corrected data.
• After the final declaration: If you discover an error after filing your EOPS, you will need to contact HMRC to amend your return, similar to the current Self Assessment amendment process. You have 12 months from the filing deadline to make amendments.

Quarterly Updates vs. End of Period Statement (EOPS)

This is a crucial distinction that many sole traders find confusing. Here is a clear comparison:

Quarterly Updates

• Submitted 4 times a year (after each quarter ends)
• Contains summarised income and expense totals by category
• Can include reasonable estimates
• Can be amended at any time before the EOPS
• Does not include capital allowances, losses brought forward, or personal allowances
• Does not trigger a tax calculation or payment

End of Period Statement (EOPS)

• Submitted once a year after the final quarter
• Confirms the accuracy of all four quarterly updates
• Adds adjustments such as capital allowances, balancing charges, and accounting adjustments
• Includes any additional income sources (employment, savings, dividends)
• Triggers the final tax calculation
• Is legally equivalent to the current Self Assessment tax return
• Once filed, you are confirming the figures are complete and correct to the best of your knowledge

"Think of quarterly updates as draft chapters and the EOPS as the final published book. The chapters can be revised, but once the book is published, formal amendments are needed." — HMRC MTD Guidance

Common Mistakes to Avoid

Based on HMRC pilot data and accountant feedback, these are the most frequent errors in quarterly reporting:

1. Mixing personal and business expenses: Keep clear separation. A personal mobile phone bill should not appear in your business expenses unless you have a legitimate claim for business use proportion.
2. Forgetting bank interest and minor income: Even small amounts of other business income must be included. Commission payments, cashback, and insurance payouts all count.
3. Misallocating expenses to wrong categories: HMRC's categories are specific. Software subscriptions go under "general administrative expenses", not "professional fees." Training courses are not "advertising."
4. Submitting after the deadline thinking there is a grace period: There is no grace period under the new points system. The deadline is the deadline. Even one day late earns a penalty point.
5. Not reconciling bank transactions: Unreconciled transactions mean incomplete data. Reconcile your bank account before each quarterly submission.
6. Ignoring the quarterly update thinking the EOPS covers everything: You must submit all four quarters separately. You cannot skip quarters and catch up at the EOPS.
7. Double-counting income across quarters: If an invoice spans two quarters, include the income in the quarter when it was received (cash basis) or earned (accruals basis), not both.

Tips for Making Quarterly Reporting Painless

A Year in the Life: Your MTD Quarterly Calendar

Here is what a typical year looks like for a sole trader under MTD, showing both reporting and payment obligations:

← Back to all articles