MTD Quarterly Updates Explained: No, It’s Not Five Tax Returns

The single most persistent myth about Making Tax Digital for Income Tax is that you now have to file five tax returns a year. You do not.

HMRC’s own guidance puts it plainly: quarterly updates “are summaries, not tax returns”. They contain no reliefs, no allowances, no capital allowances, no accounting adjustments and no declaration. Your software adds up the digital records you have already created and sends four category totals to HMRC. That is the whole job.

Here is what a quarterly update actually contains, when it is due, and what still happens at the year end.

What a quarterly update actually is

Every three months your compatible software totals your digital records for each business you run, producing summary figures for income and expenses by category. Making Tax Digital for Income Tax uses the same income and expense categories as Self Assessment — nothing new to learn.

You make no adjustments before sending. HMRC states you do not need to make any accounting or tax adjustments before submitting a quarterly update. Disallowable expenses, prepayments, accruals, capital allowances and reliefs all wait until the year end.

HMRC does not see your individual records. It receives category totals only — not receipts, not invoices, not individual transactions.

Each update is cumulative. Every quarterly update covers from the start of the tax year to the end of that update period, not just the previous three months. That design point matters more than it sounds: it means you can correct an earlier mistake in your records and the fix flows through on the next submission. You do not have to resend anything.

Nil returns still count. If you received no income and incurred no expenses in an update period, you must still send the update to tell HMRC that.

The four deadlines

The deadlines are fixed and identical for everyone: 7 August, 7 November, 7 February and 7 May.

What varies is the period each update covers, and that depends on which update periods you use.

Standard update periods

Use these if your accounting period aligns with the tax year (6 April to 5 April).

Calendar update periods

Use these if your accounting period runs 1 April to 31 March. HMRC recommends them in that case because they make record keeping simpler.

You must select calendar update periods in your software before you send your first quarterly update of the tax year. Once the first update has gone, you cannot switch for that year.

One update per business. If you have two sole trader businesses, you send two sets of quarterly updates. All your UK properties, by contrast, count as a single UK property business and produce one update between them.

When you can send

You do not have to wait for the deadline, and you do not have to wait for the period to close either. You can submit any time from the end of the update period up to the deadline, and you can send up to 10 days before the period ends if you know no further transactions are coming — useful if you are away for the last stretch of a quarter.

You can also send more often than quarterly. Most compatible software allows an update on any day. Because updates are cumulative, a mid-quarter submission simply covers a longer stretch from 6 April; it does not replace the quarterly obligation.

What actually happens at the year end

This is where the real work sits, and it looks a lot like the return you already file.

Step 1 — send your fourth quarterly update. After this, HMRC holds the full-year totals for every business you have.

Step 2 — make your adjustments. In your software, this can include:

• claiming reliefs and allowances, such as the trading income allowance
• tax adjustments, such as stripping out disallowable expenses
• accounting adjustments for prepayments and accruals (not needed if you use the cash basis, which is the default)
• adjustments arising from a non-tax-year accounting period
• capital allowances claims

Most adjustments are made by changing the annual total for a category, not by editing individual transactions.

Step 3 — add your other income. HMRC pre-populates what it already holds: employment (PAYE) income, pensions, taxable state benefits, student and postgraduate loan plan types, CIS subcontractor deductions, Capital Gains Tax residential property disposals and Marriage Allowance claims. You add the rest — savings interest, dividends, your share of partnership profit, and anything else outstanding.

Step 4 — submit by 31 January. The deadline has not moved. Your 2026/27 return is due by 31 January 2028, and the payment date is unchanged too. Making Tax Digital does not change how or when you pay.

If you need to correct the return afterwards, you can do so in your software within 12 months of the submission deadline.

Penalties: what applies and when

HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. That is a genuine grace period, and it is widely misreported. What it does not do is make the updates optional — you still have to keep digital records and send every quarterly update before you can submit your tax return, and late return and late payment penalties apply as normal.

From the 2027 to 2028 tax year, a missed quarterly update earns a penalty point. The penalty point threshold is 4 points. Reaching it triggers a £200 penalty, and another £200 for each subsequent missed deadline.

You can only get one point per deadline, even if you run several businesses and file several updates late on the same day. If you are also VAT registered, your Income Tax points are separate from your VAT points.

Frequently asked questions

Are quarterly updates the same as filing a tax return?
No. A quarterly update is a summary of income and expense totals by category, sent from your digital records. It contains no reliefs, no allowances and no declaration. You still submit one tax return a year, by 31 January.

Do I have to send a quarterly update if I had no income that quarter?
Yes. If you received no income and incurred no expenses during an update period, you must still send the quarterly update to tell HMRC.

What happens if I make a mistake in a quarterly update?
Correct the digital record and the fix flows through automatically, because every update covers from the start of the tax year. If you have already sent your fourth update, you can either resend it or adjust the category total in your software before you finalise.

Do I have to pay tax every quarter now?
No. Making Tax Digital for Income Tax does not change the way you pay tax or the dates payments are due. Your software will show a running estimate of your bill after each update, but it is an estimate, not a demand.

When do the quarterly update penalties start?
HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. From 2027 to 2028 onwards, each missed update deadline earns a point, and 4 points triggers a £200 penalty.

Getting the quarters off your desk

Four submissions plus a year-end return is more touchpoints than one January scramble, but each individual submission is small. The problem is rhythm: every quarter has a hard date, the software has to be authorised and set up correctly, and the year-end adjustments still need someone who knows what is allowable.

SmartFiling handles MTD for Income Tax and Self Assessment on a fixed fee, covering quarterly updates, year-end adjustments and your final return. Every submission is reviewed by an ICAEW Chartered Accountant, turnaround is three weeks, and it is all handled online — no phone calls required.