Your First MTD Quarterly Update: A Practical Checklist

If Making Tax Digital for Income Tax applies to you, your first quarterly update is the moment it stops being a topic you read about and becomes something you actually do. The good news is that the first one is usually the hardest, because everything is new: the software, the login, the categories and the deadline. This checklist walks through what to prepare, what to send and what to check afterwards.

Key takeaways

• A quarterly update is a summary of income and expenses, not a tax payment.
• You need compatible software, HMRC sign-up and your income records in order before the first deadline.
• Sort your records into categories as you go, so the quarter-end is a review, not a rebuild.
• Mistakes can be corrected in later updates, but it is far easier to get the set-up right first time.

What a quarterly update actually is

Under Making Tax Digital for Income Tax, sole traders and landlords who fall within the rules send HMRC a short digital summary of their business income and expenses every quarter. It replaces the old habit of leaving everything until the end of the tax year. You still finish the year with a final declaration, and your tax is still worked out on the whole year, not on each quarter. If you are not sure whether you are in scope yet, start with our guide to MTD for Income Tax eligibility and the current rules on GOV.UK.

Before the first quarter ends

Do the groundwork early. Most problems with a first update are set-up problems, not tax problems.

• Choose software from HMRC's list of compatible products and check that it covers your type of income.
• Sign up for Making Tax Digital for Income Tax with HMRC, or ask your agent to do it for you.
• Connect your bank feed or set up a clean way to import transactions.
• Agree how you will keep receipts, such as photos stored against each transaction.
• Note your quarter dates and your submission deadline in your calendar. Our guide to MTD quarterly update deadlines shows how the dates fall.

The first quarterly update checklist

Getting your income right

Include every source of business income for the period, not just the one that is easiest to see in your bank. For a driver that can mean weekly platform payments, tips, cash fares and any direct bookings. For a small trader it may include card settlements that arrive net of fees. Record the gross amount and show fees as an expense rather than netting them off, unless your software or accountant tells you otherwise. If you are a driver, our Uber driver tax return guide explains how platform income is treated.

Getting your expenses right

Only claim costs that are wholly and exclusively for the business, and apportion mixed-use costs sensibly. Vehicle running costs, phone use and home-office costs are the usual areas where a split is needed. Use the same method every quarter so your figures are consistent. If you are unsure what counts, read our guide to sole trader allowable expenses.

Worked example (illustrative)

"Nadia", an illustrative example, is a self-employed courier who is in scope for Making Tax Digital this year. Two weeks before her first deadline she connects her bank to her software and finds three months of transactions waiting to be sorted. She spends an evening categorising them: platform payments go to income, fuel and insurance go to vehicle costs, and one grocery shop that slipped in goes out as personal. She spots a duplicate payment, fixes it, checks that her totals look sensible against her bank balance and submits with a few days to spare. The following quarter takes a fraction of the time because she categorises weekly. The names and figures here are invented to show the routine, not to suggest any particular result.

After you submit

Keep the submission confirmation and a copy of the figures. If you notice an error afterwards, do not ignore it. Quarterly figures are cumulative, so corrections can usually be reflected in the next update, and they are finalised in your end-of-year declaration. Your tax is not settled by the quarterly updates themselves, so keep an eye on cash flow for your final bill, including any payments on account.

Common mistakes

• Leaving the set-up to the deadline week. Sign-up and software connection can take longer than you expect.
• Using the personal account for business spending. It makes categorising slow and error-prone.
• Forgetting cash or off-platform income. Everything earned in the quarter belongs in the update.
• Assuming the update is the tax bill. Tax is calculated on the full-year figures, so set money aside regularly.
• Not keeping receipts. You must still be able to support the figures you send.

If you would rather not manage this yourself, our MTD compliance support covers software set-up, quarterly submissions and year-end. You can also get in touch to talk through your first update.