As part of HMRC’s mission to ‘Make Tax Digital’ (MTD), they’ve announced the mandatory dates for the online income tax self-assessment (ITSA). Under the MTD for ITSA rules, landlords and self-employed taxpayers must provide digital quarterly updates on their income tax.
As announced in the Autumn Statement 2023, taxpayers subject to income tax on their trade, profession, property income, or business with an income above £50,000 will be required to keep their accounting record electronically from April 2026.
Quarterly Updates: Your Questions Answered
For many, this change may be a daunting one. That’s why we’ve created this article to answer any questions you might have about moving your tax records online. From breaking down quarterly updates to instructions on submission, keep reading for the complete lowdown on HMRC’s latest announcement.
- Why Are Quarterly Updates Needed?
- Who Needs To Send Quarterly Updates?
- How Do You Submit Quarterly Updates?
Why Are Quarterly Updates Needed?
Quarterly updates are beneficial for both HMRC and the taxpayer. They’re a clear indication that the taxpayer is keeping their records up to date regularly and staying on top of their finances. Not just this, based on their reported income, taxpayers can receive an estimate of the income tax they’ll need to pay. This gives landlords and self-employed taxpayers more time to prepare for bills.
Additionally, in the latest MTD for ITSA announcements, HMRC clarified that quarterly updates will now be cumulative. This means errors in the previous quarter’s reporting can be amended in the following quarter. Resubmitting previous quarters is no longer necessary, making the whole process easier for the taxpayer.
Who Needs To Send Quarterly Updates?
From April 2026, landlords and self-employed people with an income over £50,000 will need to comply with MTD rules. This means they’ll need to submit their quarterly updates to HMRC electronically (either using suitable software or on a spreadsheet). The date for those with an income between £30,000 and £50,000 is a year later, in April 2027. There are currently no plans for implementing the MTD for ITSA rules for those earning under £30,000 annually.
How Do You Submit Quarterly Updates?
Quarterly updates can be sent to HMRC via MTD-compatible software. As long as your records are kept up to date, your accounting software will help you gather all of the necessary information. The taxpayer or an accountant on their behalf can submit this update. Any accountant or bookkeeper making the submission will need authorisation.
Taxpayers will have a month after each period end date to send their quarterly update. Failure to do so on time may result in a penalty, so it’s important to prepare for these changes well in advance.
Making Tax Digital Support
At Digital Tax Matters, we can help you comply with the MTD regulations. We offer assistance in selecting and implementing digital accounting systems, provide training and ongoing support, conduct compliance checks, and ensure accurate quarterly reporting. Many of our clients choose to outsource their digital bookkeeping to us.
You’ll need to take three steps to prepare for the changes which come into force on the 1st of April 2026:
- Ensure you have set up and have access to your own gateway:
If you haven’t already, then you will be required to create a personal gateway as soon as possible; not only is this necessary for MTD, but it is also a useful tool to keep on top of your personal tax affairs. Your gateway will link to our agent services account and create a digital handshake, which will allow us to file the quarterly returns on your behalf. You can this link to create your personal gateway. - Use software to allow a seamless exchange of information with us:
We have conducted research across a number of software providers, and we advise the best and most efficient software to help you Comply is ‘Xero Simple’‘. This software is packed with features to assist you in complying with the upcoming changes, including a live bank feed and digital receipt-capturing app. The cost for this software is £7 per month. - Set up a separate business account for business use only (includes rental income and sole traders):
If you are currently using your personal account for business transactions, we advise you to set up a separate account for business use only. This will ensure the transactions being pulled through with the live feed capture business transactions only. This will help keep your accountancy fees as low as possible and allow us to report the quarterly figures as efficiently as possible.
Please contact us and discuss this in further detail with your account manager. You can get in touch with us as a new client or for general enquiries via 01234 357595 or [email protected].