Frequently asked questions on MTD for Income Tax quarterly updates

If you are a sole trader or landlord eligible for Making Tax Digital for Income Tax, quarterly updates are not new to you. Quarterly updates are digital reports submitted to HMRC four times a year, giving an ongoing view of your income and expenses. You’ll still need to make a final declaration to HMRC by submitting an annual tax return using MTD-compatible accounting software.

Your first MTD for Income Tax quarterly update is due on 7 August 2026. If you're preparing for your first quarterly update, we've answered the most commonly asked questions to help you get ready for MTD compliance.

Who needs to send quarterly updates?

Listed below are the income thresholds for MTD for Income Tax:

Sole traders and landlords whose qualifying income was above the relevant threshold in the previous tax year must use MTD-compatible accounting software to send quarterly updates to HMRC.

What needs to be included in the quarterly updates?

Quarterly updates summarise all your income and expenses related to your self-employed activities or rental income from your property for each three-month period. These updates give you a clearer view of your income and expenses throughout the year.

When do I need to send my quarterly updates?

You have one month after the end of each quarterly period to submit your quarterly update. The standard quarterly periods and their submission deadlines are listed below:

Why are quarterly updates needed?

Sending quarterly updates as part of MTD for Income Tax is not just a compliance requirement created by HMRC. Quarterly updates make tax reporting easier by replacing one large reporting task with four smaller submissions throughout the year. Note that quarterly updates are reporting obligations, not four separate tax payments. Here are some of the benefits of sending quarterly updates to HMRC:

• They are like a free health check-up for your business.

• They provide a real-time estimate of your tax liability.

• They help businesses maintain accurate digital records.

• They enable businesses to plan for taxes while it still matters.

• They encourage consistent bookkeeping throughout the year.

What happens if you miss a deadline?

HMRC's penalty system for MTD for Income Tax applies to both late submissions and late payments.

• Every missed submission deadline results in a penalty point.

• A £200 fine is automatically triggered once you reach the penalty threshold.

• Any further late submissions incur an immediate £200 fine.

• Penalty points are reset when you meet the required compliance conditions.

Note: Penalties are not applicable to the first tax year for newly mandated people

Can I correct a mistake in a previous quarter's update?

Yes, you can miss something in a quarterly update, you can add or adjust it in the next one.

Does a quarterly update tell me how much tax I owe?

A quarterly update itself does not calculate your actual tax liability or trigger a payment. It only lets you see an estimate of your tax bill in your accounting software or HMRC online account. Your actual tax liability will be finalised when you submit your Final Declaration.

How do you file quarterly updates with HMRC?

You must submit your quarterly updates using HMRC-approved, MTD-compliant accounting software. Cloud accounting software like Zoho Books is a great choice because it not only helps you manage your business finances but also keeps you compliant with HMRC requirements.

What software can I use? Is any of it free?

HMRC does not provide free software but offers a list of approved software that you can choose from based on your business needs. Accounting software like Zoho Books is completely free for MTD for Income Tax.

Final thoughts:

At Zoho Books, we understand that many businesses are going digital for the first time and may find the transition overwhelming. That's why our MTD-compliant accounting software offers a free plan for both sole traders and landlords. From maintaining digital records to filing quarterly updates and your final declaration, you can manage your entire MTD for Income Tax compliance with Zoho Books for £0.

Filing your first quarterly update doesn't have to be difficult. The key is to prepare early and submit on time so you stay compliant with HMRC requirements and avoid penalties.