Why HMRC changed the reporting
HMRC's stated aim is fewer errors and a tax position that is closer to real time. Under the old system the figures came from a January reconstruction of a year that had already ended, often from a box of receipts. Under Making Tax Digital they come from records created as the work is done, which are sent to HMRC in stages rather than once.
The quarterly update is a summary, not a tax return. HMRC receives totals for each income and expense category, not the individual transactions behind them. Each update covers the tax year to date rather than just the last three months, which is what lets you correct a mistake in the next update instead of resending an old one.
The chain, in order
- Sign up for Making Tax Digital for Income Tax, or check what HMRC has done if it signed you up
- Choose compatible software, authorise it so it is connected to HMRC, and check your accounting period before your first update
- Create digital records of your self-employment and property income and expenses as you work
- Send a quarterly update every three months, built from those records
- After the tax year ends, add any other income and make your adjustments, submit your tax return, and pay what you owe by 31 January
What you send, and when
The four update periods run through the tax year, and each one has a deadline a little over a month after it closes.
| Update covers | Deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 July to 5 October | 7 November |
| 6 October to 5 January | 7 February |
| 6 January to 5 April | 7 May |
You do not have to send on the deadline day. You can send at any point from the end of the period up to the deadline, and up to ten days before the period ends if you expect no further transactions. A quiet quarter still has to be sent: if you had no income and no expenses in the period, you must still tell HMRC.
If your accounting period runs from 1 April to 31 March rather than the tax year, your software can use calendar update periods instead. The deadlines are the same either way, but the choice is locked in once you have sent your first quarterly update.
What your software is actually doing
Compatible software does four jobs: it creates and stores the digital records, it adds them into category totals for each update period, it sends those totals to HMRC, and at the end of the year it carries the figures into your tax return so you are not typing them twice.
TradeKit does those four jobs in the one place you already use for the job. Quotes and invoices create the income records, expenses, mileage and photographed receipts create the rest, and the four quarterly totals sit with the deadline beside them, so the update is a review rather than a reconstruction.
What does not change
- You still submit a Self Assessment tax return for the tax year
- You still pay your tax by 31 January after the tax year ends, and payments on account still work the same way
- You still keep your records for at least 5 years after the 31 January submission deadline
- Penalty points still apply to a missed tax return deadline, even in the year when quarterly updates are lenient