Quarterly updates explained
If you have heard about Making Tax Digital for Income Tax, one of the first things you may have come across is the phrase “quarterly updates”.
I know this can sound worrying at first. Many people hear it and think it means doing four full tax returns every year. Thankfully, that is not the case.
Quarterly updates are part of Making Tax Digital, often shortened to MTD. They are regular summaries of your income and expenses, sent to HMRC through compatible software during the year.
That still means your records need to be kept up to date, but it does not mean you are completing a full Self Assessment return every 3 months. The main thing to understand is this: quarterly updates become much easier when your bookkeeping is organised as you go along, rather than left until the end of the year.
What are quarterly updates?
Under Making Tax Digital for Income Tax, quarterly updates are summaries of the income and expenses recorded in your digital bookkeeping software.
Every 3 months, your software will use the records you have entered to create totals for the relevant income and expense categories. These totals are then sent to HMRC as a quarterly update.
A quarterly update is not the same as a full tax return. It does not replace the end of year process, and it does not mean everything is finalised at that point.
It is simply a regular update based on the records you have kept so far.
Why do quarterly updates matter?
Quarterly updates matter because they change the rhythm of bookkeeping.
For many sole traders, records are still something that gets sorted once a year. Receipts are gathered, bank statements are checked, expenses are remembered as best as possible, and everything is pulled together before the Self Assessment deadline.
That approach becomes much harder under MTD. If updates need to be sent during the year, your records need to be more current. Income and expenses need to be recorded more regularly, and your bookkeeping system needs to be clear enough to produce the right figures when they are needed.
This is where the change can actually become useful. Instead of only looking at your figures once a year, you can build a habit of keeping your records up to date throughout the year. That gives you more control, fewer surprises, and a better understanding of what is happening in your business.
Are quarterly updates the same as tax returns?
No. This is one of the most important things to understand.
A quarterly update is a summary of income and expenses for that period. It is not a full Self Assessment tax return, and you do not need to make all your final tax or accounting adjustments before sending it.
Your final tax position is still dealt with through the end of year process. That is when the year is brought together properly, and any final adjustments are made.
So while quarterly updates are not full tax returns, they do still depend on regular bookkeeping. If income is missing, expenses have not been entered, or transactions are unclear, the update may not give a useful picture.
What information is included?
Quarterly updates usually include totals for income and expenses from your digital records.
If you are a sole trader, your software will use the records for your self-employment income and business expenses.
If you have more than one source of income, such as self-employment and rental income, you may need to send updates for each relevant source.
This is why it helps to keep your records clearly separated. Mixing business income, personal spending, property income and different bank accounts can make everything harder to manage.
A tidy system makes the updates much easier to prepare.
What can make quarterly updates stressful?
Quarterly updates usually become stressful when the bookkeeping is not up to date.
This might happen if receipts are kept in different places, expenses have not been entered, bank transactions have not been checked, or income has not been recorded properly.
It can also happen when someone has moved to software but does not feel confident using it. The software may be there, but the records may not be tidy, complete or easy to understand.
That is when a simple update can start to feel much bigger than it needs to be.
The aim is to avoid that last-minute scramble. If records are kept up to date throughout the year, quarterly updates become part of a routine rather than a panic.
How regular bookkeeping helps
This is where regular bookkeeping really helps.
When your income and expenses are recorded properly, your transactions are checked, and your records are kept up to date, quarterly updates become much more manageable.
It also means you are more likely to spot missing information early. If something does not look right, it can be dealt with while it is still fresh, rather than months later when it is harder to remember.
Regular bookkeeping can also help you understand your business better. You can see what is coming in, what is going out, whether costs are increasing, and whether you need to plan ahead for tax or cash flow.
That is one of the real benefits of keeping records up to date. It is not just about sending information to HMRC. It is about making your own figures clearer too.
Do you have to do this yourself?
Not necessarily.
Some people are happy to manage their own bookkeeping software and submit updates themselves. Others prefer to have support, especially if they are not confident with digital records or do not have time to keep everything organised.
This is where we can help.
We can help you get your records into a clearer system, keep your bookkeeping up to date, and make sure the information you need is ready when it is time to deal with quarterly updates.
For many people, the reassurance is just as important as the practical help. It means you are not trying to work everything out on your own, and you are not leaving it all until the deadline is close.
A simple way to think about it
The easiest way to think about quarterly updates is this: you are not doing four full tax returns. You are keeping your records up to date and sending regular summaries during the year.
That still takes organisation, but it is much easier when your bookkeeping is part of your normal routine rather than something you only look at once a year.
If your records are currently in a few different places, which is very common, now is a good time to start bringing them together. You do not need to wait until MTD feels urgent. Getting organised early gives you more time, more confidence and fewer surprises.
A calmer way forward
Quarterly updates may sound like a big change, but they are much less daunting when there is a clear system in place.
The first step is to look at how your records are currently kept. Are you using software already? Are your bank transactions up to date? Do you know where your receipts and invoices are? Are your business and personal finances clearly separated?
Once you know where you are starting from, it becomes much easier to make a plan.
If you are unsure what quarterly updates could mean for you, please get in touch. We can help you understand what may need to change and how to keep your bookkeeping manageable throughout the year.
Please note: This article is intended as general guidance only and should not be treated as personal tax advice. Tax rules can change, and everyone’s circumstances are different. If you are unsure what applies to you, please contact Nicola at Tranmere Bookkeeping, and she will be happy to help or point you in the right direction.
