Making Tax Digital for Income Tax / Lesson 1 of 7
What changes, and what does not
Four submissions a year instead of one. Does that mean four tax bills?
The short answer
- ✓ MTD changes reporting frequency and format, not the tax you owe
- ✓ Quarterly updates are summary totals, not four mini tax returns
- ✓ Everything is finalised once a year at the final declaration
- ✓ Payment dates of 31 January and 31 July are unchanged
The short version
Making Tax Digital replaces the single annual Self Assessment return with quarterly updates sent from compatible software, followed by a final declaration after the tax year ends. Your tax bill, your rates, your allowances and your payment dates are unchanged.
| Self Assessment | Making Tax Digital | |
|---|---|---|
| How often you report | Once a year | Four quarterly updates plus a final declaration |
| How records are kept | Any format you like | Digitally, in compatible software |
| How you submit | HMRC website or software | Compatible software only |
| When you pay | 31 January and 31 July | Unchanged |
| What you owe | Based on annual profit | Based on annual profit, identical |
Quarterly updates are not quarterly tax returns
This is the single biggest source of anxiety about MTD, and it is based on a misunderstanding. A quarterly update is a summary of income and expenses for the period. It is not a calculation, it is not a bill, and it is not final.
Total income for the quarter
Total expenses for the quarter, by category
That is it. No tax calculated. No payment due.
Nothing finalised. Corrections happen later.All the things that make a tax return complicated, reliefs, adjustments, allowances, other income sources, happen once a year at the final declaration. You are not being asked to be right four times a year.
The final declaration
After the tax year ends you confirm your figures, add anything the quarterly updates did not cover, claim your reliefs, and declare the year complete. This is the point at which your tax is calculated. Functionally it is the annual return you already know, arriving after four summaries rather than after nothing.
The bit HMRC does not spell out
MTD is far less disruptive for people who already record transactions as they happen, and far more disruptive for people who reconstruct their year each January. The change is not really about software. It is that the January reconstruction habit stops being possible, because you have to have produced something in July, October and the following January along the way.
If you already keep current records, MTD is a change of file format. If you do not, MTD is a change of working life. That gap is worth closing before the mandate reaches you rather than after.
Common mistakes
- Believing your tax bill changes. It does not. Only the reporting does.
- Treating quarterly updates as four returns. They are summaries, finalised annually.
- Assuming payment dates move. 31 January and 31 July are unchanged.
- Waiting for perfection. Updates can be corrected later; the final declaration is what counts.
Try it on your own numbers
This is the same calculator as the full tool page, using 2026/27 rates.
Check if Making Tax Digital applies to you
MTD for Income Tax is based on your gross (pre-expenses) income from self-employment and property - combined. Enter your figures below.
"Gross" means total income before deducting any expenses. Don't include employment (PAYE) salary, dividends, savings interest or pensions - MTD for Income Tax counts only self-employment and property income.
Where you sit on the MTD timeline
What you'll need to do
- Keep digital records of your income and expenses.
- Send a quarterly update to HMRC (4 per year) using compatible software.
- Submit a final declaration after the tax year end (replacing the old Self Assessment return).
Key takeaways
- ✓ MTD changes reporting frequency and format, not the tax you owe
- ✓ Quarterly updates are summary totals, not four mini tax returns
- ✓ Everything is finalised once a year at the final declaration
- ✓ Payment dates of 31 January and 31 July are unchanged
Check you have got it
3 quick questions. No score is kept, and you can change your mind.
1. Under MTD, when is your tax actually calculated and finalised?
2. What does a quarterly update contain?
3. Does MTD change when you pay your tax?
Sources
Finished this lesson?
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