Step-by-Step Guide: Submitting Your First MTD Income Tax Quarterly Update
Last updated: February 2026
Quarterly updates are the core reporting requirement under Making Tax Digital for Income Tax Self Assessment (MTD ITSA). If you are a sole trader or landlord above the qualifying income threshold, you need to send four of these updates to HMRC each tax year using MTD-compatible software. This guide explains exactly what a quarterly update contains, how to submit one, and what to expect afterwards.
The good news is that quarterly updates are much simpler than most people expect. They are not mini tax returns. You do not need to calculate tax, claim reliefs, or finalise anything. A quarterly update is a summary of your income and expenses for the period, broken down by category, sent digitally to HMRC through your software.
What a quarterly update actually contains
Each quarterly update sends HMRC a set of cumulative income and expense totals, grouped by category. On the income side, this includes figures such as turnover from your trade or rental income from your properties. On the expenses side, it covers categories like repairs and maintenance, insurance, travel costs, professional fees, and other allowable business expenses.
Your software organises these figures automatically based on how you categorise your transactions. You are not writing a narrative or providing detailed breakdowns of every receipt. The update is a structured data submission that your software handles behind the scenes.
Quarterly updates are cumulative
This is a point that catches many people off guard. Each quarterly update covers the full tax year to date, not just the quarter in question. Your Q1 update covers 6 April to 5 July. But your Q2 update covers 6 April to 5 October, including everything from Q1 as well.
This cumulative approach has a practical benefit. If you made an error in your Q1 figures, or forgot to include a transaction, you do not need to go back and amend Q1 separately. When you submit Q2, the updated cumulative totals automatically correct whatever was wrong in Q1. By Q4, your final quarterly update reflects the full, corrected picture for the entire tax year.
Think of it like a running total rather than four separate snapshots. HMRC always looks at your most recent submission as the definitive position.
What quarterly updates are not
Quarterly updates are not mini tax returns. You do not calculate your tax liability, apply personal allowances, or claim capital allowances in a quarterly update. There is no box for pension contributions, Gift Aid, or marriage allowance. Those adjustments happen later in your Final Declaration, which is due by 31 January following the end of the tax year.
You also do not need to submit invoices, receipts, or bank statements alongside your update. HMRC receives the category totals only. You must keep the underlying records, of course, as HMRC can request them during a compliance check. But the quarterly update itself is a summary.
The quarterly deadlines
Each tax year has four standard quarterly periods with fixed submission deadlines. These apply to every taxpayer under MTD ITSA, regardless of which phase you fall into.
| Quarter | Period covered | Submission deadline |
|---|---|---|
| Q1 | 6 April to 5 July | 7 August |
| Q2 | 6 July to 5 October | 7 November |
| Q3 | 6 October to 5 January | 7 February |
| Q4 | 6 January to 5 April | 7 May |
You have roughly one month after each quarter ends to prepare and submit your update. The Final Declaration, where you finalise your tax position and claim allowances, is due by 31 January following the end of the tax year. For the 2026/27 tax year, that means 31 January 2028.
Step-by-step: submitting your first quarterly update
The exact screens will vary depending on which software you use, but the overall process follows the same pattern across all MTD-compatible products.
Step 1: Ensure your transactions are up to date
Before you can submit, your software needs an accurate record of every income and expense transaction for the period. If you use a bank feed (Xero, FreeAgent, QuickBooks and most other cloud packages offer this), check that all transactions have been imported and none are sitting unreconciled in your inbox. For property income, make sure all rental payments received and landlord expenses paid during the period are recorded.
If you enter transactions manually, now is the time to work through your bank statements and ensure nothing has been missed. A common approach is to set a calendar reminder a few days after each quarter ends to reconcile everything while the details are still fresh.
Step 2: Categorise your transactions
Every transaction needs to be assigned to the correct income or expense category. Your software will have standard categories that map to the HMRC submission fields. Typical expense categories include premises costs, repairs, travel, telephone, professional fees, and office supplies. Income categories are usually simpler: sales or turnover for a sole trade, or rental income for a property business.
If your bank feed has auto-categorised transactions using rules you have set up previously, review those categorisations for accuracy. Miscategorised expenses will not trigger a penalty, but they could cause confusion if HMRC queries your figures later.
Step 3: Review the quarterly summary
Your software will generate a summary of the figures it plans to submit. This is your chance to sense-check the numbers. Does the total income look right for the period? Are the expense categories broadly in line with what you would expect? If your Q1 rental income should be around £4,500 and the summary shows £450, something is off.
Remember that from Q2 onwards, the summary shows cumulative year-to-date figures. Do not be alarmed when your Q2 income figure is roughly double your Q1 figure. That is exactly how it should work.
Step 4: Connect to HMRC and authorise
If this is your very first submission, your software will need to establish a connection with HMRC’s systems. This typically involves signing in to your Government Gateway account through a prompt within the software and granting authorisation. You only need to do this once. The authorisation lasts for 18 months before needing renewal.
If your accountant handles your submissions, they will have already set up this connection through their Agent Services Account. You may have approved a digital authorisation request when you first signed up for MTD ITSA.
Step 5: Submit the update
Click submit (or the equivalent button in your software). The software sends the data to HMRC through their API. You should receive a confirmation message within seconds, including a reference number or receipt. Save this for your records. Most software packages also log the submission details automatically.
What happens after you submit
HMRC receives your cumulative figures and uses them to build a picture of your income for the year. After each quarterly update, HMRC may provide an estimated tax calculation based on the figures you have submitted so far. This is purely indicative and does not create a payment obligation at that point.
Your payment obligations remain unchanged. Income tax is still due on 31 January and 31 July under the existing payments on account system. Quarterly updates do not change when you pay tax; they only change how often you report your figures.
If you spot an error after submitting, there is no need to panic. Your next quarterly update will include corrected cumulative totals. HMRC has confirmed that the cumulative approach means earlier errors are automatically overwritten by later submissions. For more detail on how errors affect penalties and compliance, see our penalties guide.
Worked example: James submits his first Q1 update
James is a landlord in Manchester who owns three residential properties. His combined gross rental income is £58,000 per year, which puts him above the £50,000 Phase 1 threshold starting 6 April 2026. He uses Xero to manage his property finances and has already signed up for MTD ITSA.
During Q1 (6 April to 5 July 2026), James receives the following rental income:
- Property A (2-bed flat, Didsbury): £2,700 (3 months at £900)
- Property B (3-bed house, Stockport): £3,450 (3 months at £1,150)
- Property C (1-bed flat, Salford): £2,100 (3 months at £700)
Total Q1 rental income: £8,250
His expenses during Q1 are:
- Insurance premiums: £480
- Letting agent fees: £825 (10% of rental income)
- Repairs (boiler service, Property B): £195
- Accountancy fees: £300
Total Q1 expenses: £1,800
James opens Xero in late July, checks that all bank transactions for the quarter have been reconciled, and reviews the quarterly summary. It shows £8,250 total income and £1,800 total expenses across the correct categories. He clicks “Submit to HMRC” and receives a confirmation within a few seconds. The whole process takes him about 20 minutes.
When James submits his Q2 update in late October, those figures will be cumulative. If his Q2 rental income is another £8,250 and Q2 expenses are £1,650, his Q2 submission will show £16,500 total income and £3,450 total expenses for the year to date.
The soft landing for 2026/27
HMRC has confirmed a soft landing period for the first year of mandatory MTD ITSA. During the 2026/27 tax year, you will not receive penalty points for late quarterly updates. Under the normal points-based penalty system, each late submission adds one point, and reaching four points triggers a £200 fixed penalty. The soft landing means those first four quarterly updates in 2026/27 do not generate any points, even if they are submitted late.
This does not mean you should ignore the deadlines. Late payment penalties still apply if you owe tax and pay late. The soft landing only covers the quarterly update submission itself. From the 2027/28 tax year onwards, the full penalty regime applies. Getting into the habit of submitting on time from the start will save you trouble later.
Common mistakes to avoid
Waiting until the deadline day to submit. If your bank feed has not imported recent transactions, or you discover a batch of uncategorised expenses, you will not have time to fix things properly. Aim to submit at least a week before the deadline.
Treating each quarter as a separate report. Because updates are cumulative, you need to check that all transactions from 6 April onwards are accurate, not just the ones from the most recent quarter. If you accidentally deleted a Q1 transaction, it will be missing from your Q2 submission too.
Confusing quarterly updates with tax returns. Some people worry about claiming the wrong expenses or forgetting allowances. Quarterly updates do not deal with allowances, reliefs, or tax calculations. Those come later in the Final Declaration. Keep your quarterly submissions focused on recording income and expenses accurately.
Not reconciling bank transactions before submitting. Unreconciled transactions sitting in your software’s bank feed will not be included in the submission. If you have 30 unmatched transactions from May, your Q1 figures will be incomplete.
Forgetting about multiple income sources. If you have both a sole trade and property income, you need to submit separate quarterly updates for each source. Missing one while submitting the other counts as a late submission for the source you forgot.
Frequently asked questions
Can I submit my quarterly update early?
Yes. You can submit as soon as you have accurate figures for the period. There is no requirement to wait until the quarter has ended, though in practice most people submit shortly after the quarter closes to ensure all transactions are captured. Some software allows you to submit a draft and then finalise it later.
What if my income varies significantly between quarters?
That is perfectly normal and does not cause any issues. Seasonal businesses, for example, might show high income in Q2 and very little in Q4. HMRC expects variation. The Final Declaration at the end of the year is where your total annual position is confirmed.
Do I need to submit if I had no income in a quarter?
Yes. Even if you had zero income and zero expenses in a quarter, you still need to submit a nil return through your software. A nil quarterly update takes only a few minutes and ensures you do not accumulate penalty points for non-submission.
What if my software loses the connection to HMRC?
Government Gateway authorisations expire after 18 months. If your connection drops, your software will prompt you to reauthorise by signing in to Government Gateway again. This is a quick process and does not affect your previously submitted data.
How Jack Ross can help
If you would rather have a professional handle your quarterly submissions, our tax advisory team at Jack Ross can manage the entire MTD process for you. From categorising transactions to reviewing figures and submitting to HMRC, we take care of every quarterly update so you can focus on your business or properties. As our Xero advisory team, we also help set up and optimise your software for MTD compliance. Get in touch to discuss your requirements.
For a full overview of how MTD ITSA works, see our MTD Income Tax guide.
