Making Tax Digital: Quarterly Updates and End of Year Submission
Making Tax Digital (MTD) will take effect from 6 April 2026 and, for those impacted, this will mean a significant change in how you record and report your tax data to HMRC.
In this article, Tax Director, Liam Coulter, outlines what is involved in the quarterly updates and end of year submission for MTD.
What are quarterly updates for MTD?
Using your digital records, you will need to submit a summary of your business income and expenses every quarter. You won’t have to make tax adjustments, unless you choose to, and you don’t need to report anything other than business income and expenses.
The summary totals will be matched to the categories on the self-assessment return pages.
Separate quarterly updates will be needed for each trade and property business.
The quarterly updates will be cumulative – this means that errors can be corrected in the next quarter but note that you will also need to correct the underlying digit records.
What are the quarterly update dates and deadlines?
Everyone will have the same quarters aligned to the tax year (i.e. 5 July, 5 October, 5 January and 5th April).
The filing date will be 7 days following the month of the quarter end (i.e. 5 July quarter end will need to be filed by 7 August).
Alternatively, a calendar quarter election can be made, which will align the quarterly update periods with calendar months instead of the tax year, however it is important to note that the filing deadline doesn’t change.
A separate quarterly update will be needed for each trade or property business. For example, if you have sole trade and property income, you will need to submit eight quarterly submissions each year.
What are the end of year submissions for MTD?
After the fourth and final quarterly update has been submitted, you will need to file a ‘digital tax return’.
This return will pre-populate with the income and expenses from the quarterly updates already filed. Those entries will need to be adjusted for accounting and tax purposes, such as, disallowing private use or capital expenditure claims.
Other non-business income sources (dividends, bank interest, salaries, pensions etc.), will also need to be reported.
Any relevant tax reliefs, such as gift aid or pension contributions made during the year, will also be included on the end of year submission.
You will need to file one end of year submission for each tax year. It will be due by the normal self-assessment deadline of 31 January following the relevant tax year.
What happens if my income drops?
Once you are mandated into MTD, you will only become exempt if your qualifying income falls below the threshold for three consecutive tax years.
Take the below example:
2024/25 – £54,000
2025/26 – £33,000
2026/27 – £16,000
2027/28 – £16,000
2028/29 – £6,000
Based on the above, you will be mandated into MTD from 6 April 2026 (2026/27) as the £50,000 income threshold is applied to the income for 2024/25. It does not matter that your income in 2025/26 was below the £50,000 threshold.
In order to be exempt, you must have three consecutive years where your qualifying income was less than the relevant threshold in each of those years (and be within MTD). This means that in the above example you won’t be exempt from MTD until 2029/30.
It may be possible to apply for exemption before those three years have elapsed, on the grounds it is ‘not reasonably practicable’ for you to comply with MTD (for example, because you are winding down the business or have very low profits which are extinguished by the costs of complying with MTD).
Are there any simplification options?
Where your business or property income is below the VAT registration threshold, you will be able to use ‘three-line accounts’ for that income source.
This means you can record each item of income and expense without needing to allocate it to a specific category of income/expense type.
The total income and total expenses will need to be reported each quarter, with no detailed categorisation needed.
The exception to this rule is residential finance costs (e.g. mortgage interest) for landlords, which still have to be categorised separately.
Retailers can include in their digital records a single daily gross takings figure, rather than recording each transaction individually.
What about joint property owners?
Landlords will only need to keep digital records and submit quarterly updates in respect of their share of income and expenses relating to jointly owned properties (i.e. each owner has to keep digital records and submit their own quarterly updates).
Landlords can choose to keep full line-by-line details of your share of income and expenses from jointly owned properties, or, in respect of your jointly owned properties only, you can choose to record your share of income each quarter, and your share of expenses annually.
Therefore, you can choose to simply report your share of income (not expenses) each quarter, reporting your share of the expenses on the end of year submission.
If your income is below the VAT registration threshold, you can use the three-line accounts method as explained above.
Wilson Nesbitt’s Tax department can help with MTD registration, completing MTD returns, and provide guidance on the new MTD rules. If you have any questions on MTD or another tax-related matter, please get in touch here.