Your First MTD Quarterly Update: Step-by-Step Guide
Your first quarterly update under Making Tax Digital can feel daunting. You have heard about digital records, HMRC submissions, and quarterly deadlines — but what does the process actually look like in practice?
This guide walks you through your first MTD quarterly update from start to finish. No jargon, no assumptions about your accounting knowledge, just a clear step-by-step process.
Before You Start: What You Need
Before you can submit your first quarterly update, you need three things in place:
1. An HMRC Account With MTD Enabled
You need to be registered for Self Assessment (with a Unique Taxpayer Reference, or UTR) and signed up for Making Tax Digital for Income Tax through your HMRC online account. If you have not done this yet, log into your Government Gateway account and follow the MTD sign-up process.
This step can take a few days — HMRC needs to process your registration. Do not leave it until the day before your quarterly deadline.
2. MTD-Compatible Software
You need software that can submit data to HMRC via their MTD API. This is not optional — you cannot submit quarterly updates through HMRC's website like you do with Self Assessment returns.
If you have not chosen software yet, see our guide to the best MTD software for sole traders. ClearMTD is designed to make this process as simple as possible for people who are new to MTD.
3. Your Income and Expense Records for the Quarter
You need records of all business income received and all business expenses incurred during the quarter. Ideally, you have been recording these in your MTD software as they happened. If not, you will need to enter them before you can submit.
Step 1: Understand Your Quarter Dates
The MTD quarters follow the tax year:
| Quarter | Period | Submission Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 July – 5 October | 7 November |
| Q3 | 6 October – 5 January | 7 February |
| Q4 | 6 January – 5 April | 7 May |
You have one calendar month after the quarter ends to submit your update. Your first quarterly update will be for Q1 (6 April to 5 July 2026), due by 7 August 2026.
Step 2: Enter Your Income
If you have been recording income throughout the quarter, this step is already done. If not, go through the quarter and enter every payment you received from your business activities.
For each income entry, you need: - Date the payment was received - Amount received - Description or source (e.g. "Website design for ABC Ltd" or "Rent from 42 Elm Street")
Tips for Recording Income
- Use your bank statements to check you have not missed anything
- Record the date the money hit your account, not the invoice date (unless you use accruals accounting)
- If you have multiple income sources (e.g. self-employment plus rental income), record them separately as they are reported in different categories
Step 3: Enter Your Expenses
Go through the quarter and enter every business expense. For each expense, you need: - Date of the expense - Amount spent - Category (e.g. office costs, travel, stock, professional fees)
Common Expense Categories
Your software will provide standard categories. The main ones for most sole traders are:
- Cost of goods sold — materials, stock, direct costs of providing your service
- Office costs — stationery, phone, internet, software subscriptions
- Travel — fuel, public transport, parking (for business journeys only)
- Professional fees — accountant, legal advice, professional memberships
- Advertising and marketing — website costs, online ads, business cards
- Insurance — business insurance, professional indemnity
- Repairs and maintenance — for business equipment or property
- Allowable financial costs — bank charges, interest on business loans
If you are a landlord, you will have additional categories for property-specific expenses like letting agent fees, building insurance, and mortgage interest.
What About Mixed-Use Expenses?
If you use something for both business and personal purposes (a mobile phone, a car, or a home office), you can only claim the business proportion. Most people use a reasonable percentage — for example, if you use your phone 60% for business, claim 60% of the cost.
Step 4: Review Your Figures
Before submitting, review the totals for the quarter. Your software will show you a summary that looks something like:
- Total income for the quarter: £X,XXX
- Total expenses for the quarter: £X,XXX
- Net profit for the quarter: £X,XXX
Check these figures against your bank statements. Do they look right? Is the income roughly what you would expect? Are there any expenses you have forgotten?
Common things people miss: - Software subscriptions that are paid monthly - Small cash purchases where you did not get a receipt - Mileage for business journeys (if claiming simplified expenses) - A proportion of home office costs
The quarterly update does not need to be perfectly precise. HMRC understands that some adjustments may be needed at year end. But it should be a fair and accurate representation of the quarter's trading.
Step 5: Submit to HMRC
Once you are satisfied with your figures, your software will have a "submit" or "send to HMRC" button. When you click it, the software:
- Connects to HMRC's MTD API using your Government Gateway credentials
- Sends the quarterly summary data
- Receives a confirmation from HMRC that the submission was accepted
The entire submission process usually takes a few seconds. You will receive a confirmation reference number — keep this for your records.
What if the Submission Fails?
Occasionally, submissions fail due to technical issues (HMRC's systems being down, authentication problems, or connectivity issues). If this happens:
- Check that your Government Gateway credentials are correct in the software
- Try again in a few hours — HMRC's systems occasionally have maintenance windows
- Contact your software provider's support if the problem persists
Do not panic if it fails once. You have until the deadline, and intermittent technical issues are normal.
Step 6: Check the Confirmation
After a successful submission, your software should show a confirmation screen with: - The quarter you submitted for - The income and expense totals submitted - A reference number from HMRC - The date and time of submission
Some software also shows the calculated tax position so far for the year. This is an estimate — your actual tax liability is not finalised until you submit your Final Declaration after the year ends.
What Happens After You Submit?
Your quarterly update is received by HMRC and forms part of your MTD record for the year. You do not need to do anything else until the next quarter.
HMRC does not "approve" or "reject" your quarterly figures in the way they might query a tax return. The quarterly updates are accepted as submitted. If there are discrepancies, they will surface during the End of Period Statement or Final Declaration process, or in a later compliance check.
For more detail on the full quarterly reporting cycle, including the End of Period Statement and Final Declaration, see our article on HMRC quarterly reporting.
Common First-Timer Concerns
"What if I get the figures wrong?"
Quarterly updates can be amended. If you realise you made an error, you can submit a corrected update. The End of Period Statement at the end of the year also allows for adjustments. A minor error in Q1 is not a disaster.
"Do I have to pay tax after each quarter?"
No. The quarterly updates are reporting obligations, not payment obligations. Your tax payment dates remain the same — 31 January and 31 July for payments on account.
"What if I have no income this quarter?"
You still need to submit a quarterly update showing zero income. A nil return is a valid submission.
"Can my accountant do this for me?"
Yes. Your accountant can submit quarterly updates on your behalf using agent credentials. However, you still need to keep your records up to date — either by entering transactions yourself or providing them to your accountant regularly.
Making It Easy Going Forward
Your first quarterly update is the hardest because everything is new. From the second quarter onwards, it becomes routine. The single most important habit you can develop is recording your income and expenses regularly — weekly is ideal, but even fortnightly works. If you record as you go, the actual submission takes minutes.
ClearMTD is built to make quarterly updates simple, even for people with no accounting background. Enter your income and expenses, review the summary, and submit — all in one place.
Create your free ClearMTD account and be ready for your first quarterly update.
Frequently Asked Questions
How long does a quarterly submission take?
If your records are already entered in your software, the actual submission takes less than five minutes — review the summary and click submit. The time-consuming part is entering transactions throughout the quarter, which is why regular record keeping matters.
What is the penalty for a late quarterly update?
HMRC uses a points-based penalty system. Each late submission earns a penalty point. Once you reach the threshold (four points for quarterly obligations), you receive a £200 fine for each subsequent late submission. One late update will not immediately cost you money, but a pattern of lateness will.
Can I submit early?
Yes. You can submit your quarterly update any time during the quarter, updating it as you go, or submit it all at once before the deadline. Submitting early has no disadvantage.
Do I need to submit anything else besides the four quarterly updates?
Yes. After your four quarterly updates, you need to submit an End of Period Statement (finalising your business figures for the year) and a Final Declaration (confirming your overall tax position). Both are due by 31 January following the end of the tax year. See our guide: MTD End of Period Statement (EOPS) Explained
What if my software stops working mid-year?
You can switch MTD software during the year. Your previous submissions are held by HMRC regardless of which software you use. See our article on switching MTD software mid-year for guidance.