One of the biggest worries about Making Tax Digital for Income Tax is quarterly reporting. If you're self-employed, you've probably heard the phrase and immediately thought the worst.
Three questions we hear constantly:
"Do I need to submit four full tax returns every year?"
"Will I have to calculate my tax bill every three months?"
"Am I paying HMRC quarterly now?"
The short answer to all three: no.
Let's break down what quarterly updates really are — in plain English.
What is a quarterly update?
A quarterly update is simply a summary of your business income and expenses for a three-month period. Think of it as a progress report, not an exam.
It is NOT
- — A full tax return
- — A final tax calculation
- — A payment demand
- — A line-by-line audit of your receipts
It IS
- — A snapshot of how your business is doing
- — A summary of totals, not individual receipts
- — Sent digitally through compatible software
- — Something your software can do automatically
Under Making Tax Digital (MTD), if you are within scope, you'll need to send this summary to HMRC every quarter using compatible software. If your records are already up to date, it's essentially pressing a button.
What information goes into a quarterly update?
You do not send individual receipts or invoices. You send totals.
Example: What a quarterly update looks like
That's it. Totals only. No receipts, no invoices, no calculations.
If your digital records are up to date, the software will already have these totals ready to submit. For 123Tax customers, we compile this summary for you and send it via WhatsApp for your approval — one tap and it's done.
When are quarterly updates due?
The tax year (6 April to 5 April) is split into four quarters. Each update is due one month after the quarter ends:
Quarter 1
6 April – 5 July
Quarter 2
6 July – 5 October
Quarter 3
6 October – 5 January
Quarter 4
6 January – 5 April
End-of-year finalisation
Final adjustments, allowances, and tax calculation
Do you have to pay tax every quarter?
No. Payment dates stay the same.
Quarterly updates are about reporting, not paying. Your tax payment dates stay exactly where they've always been under Self Assessment.
| Payment date | What it covers | Changes under MTD? |
|---|---|---|
| 31 January | Balancing payment + first payment on account | No change |
| 31 July | Second payment on account (if applicable) | No change |
MTD changes how you report your income during the year. It does not change when tax is due. This is probably the single most misunderstood aspect of the new rules.
What happens after the fourth quarter?
After you submit your four quarterly updates, you still complete an end-of-year finalisation process. This is where the full picture comes together:
Final adjustments
Correct anything that changed since your quarterly updates — a late invoice, a forgotten expense, a rounding error.
Allowances applied
Your personal allowance, trading allowance, capital allowances and any reliefs get applied at this stage.
Other income included
Employment income, dividends, rental income, interest — anything outside your self-employment gets added here.
Your final tax position is calculated
This is when you find out exactly what you owe (or are owed). The quarterly updates are the building blocks; this is the finished product.
So while MTD introduces quarterly reporting, there is still an annual finalisation step. Think of the quarterly updates as rough drafts and the end-of-year process as the final version.
What if you make a mistake?
Mistakes happen. HMRC knows this. The system is designed to accommodate corrections, not punish honest errors.
Spotted before year-end?
Simply correct your digital records. The next quarterly update will automatically reflect the correction. No special form, no penalty.
Found after all four quarters?
You can adjust it during the end-of-year finalisation, before your tax return is formally submitted. The system is built for this exact scenario.
The key point: it's not a one-strike process. Quarterly updates are provisional. They can be corrected. The only figure that truly matters is the one in your final end-of-year declaration.
Why is HMRC doing this?
Cynicism aside, the stated aims are reasonable:
Better record-keeping
Encouraging businesses to stay on top of their books throughout the year
Fewer errors
Catching mistakes early rather than discovering them 10 months later
Clearer picture
Giving business owners a real-time view of how their business is performing
For many people already using accounting software, quarterly updates will feel like pressing "submit" on figures they already have. For others, it's a shift towards keeping records up to date instead of scrambling once a year in January.
That January scramble — digging through bank statements, chasing missing receipts, trying to remember what that £47.50 payment to Screwfix was for — is exactly what HMRC is trying to eliminate. Whether you agree with the approach or not, the direction of travel is clear.
The key takeaway
Quarterly updates are not four tax returns.
They are not four tax bills.
They are simple summaries sent digitally.
If your records are organised and your software is set up properly, the process should be straightforward. The real change isn't the reporting — it's the move towards staying organised throughout the year.
If you're unsure whether Making Tax Digital applies to you, or you'd like help getting your systems ready, get in touch with 123Tax. We'll get you sorted — no jargon, no fuss.