Send a quarterly update for MTD for Income Tax

This article explains how to send a quarterly update to HMRC for Making Tax Digital (MTD) for Income Tax using FreeAgent.

HMRC requires anyone registered for MTD for Income Tax to keep digital records and send income and expense totals every quarter. You can choose to send either full expenses or consolidated expenses. We do not send individual transactional data to HMRC because this is not required. You can enable quarterly updates to be sent to HMRC automatically or follow the steps below to send them manually each time. 

Quarterly updates need to be submitted for each separate self-employment and property income source. Therefore, if you have more than one income stream, for instance if you're self-employed and also a landlord, you'll need a sole trader and an unincorporated landlord account in FreeAgent. You can find out what counts as multiple income streams, as well as tips for managing more than one income stream, in our how to efficiently manage multiple income streams guide.

Quarterly updates can be submitted after the end of the quarter and are currently due one month after the end of the quarter for 'standard quarters' submissions, and one month and seven days for calendar year submissions. Read more about first year of MTD for Income Tax submissions.

The table in FreeAgent provides a useful timeline of when each quarterly update is due to be submitted. You’ll find this on the Self Employment page if you have a sole trader account type and on the UK property page if you have an unincorporated landlord account type.

By default, your quarterly updates will be set automatically to so-called ‘standard quarters’ by HMRC. The standard quarterly periods are based on the tax year and the quarters cover the following periods:

• Q1: 6th April to 5th July
• Q2: 6th July to 5th October
• Q3: 6th October to 5th January
• Q4: 6th January to 5th April

Alternatively, you can choose to use calendar update periods which end on the last day of the month. This may make your record-keeping simpler if your accounting period ends on 31st March. The calendar update periods cover the following periods:

• Q1: 1st April (or 6th April if you’re switching to calendar quarters) to 30th June
• Q2: 1st July to 30th September
• Q3: 1st October to 31st December
• Q4: 1st January to 31st March (or 5th April if you’re switching away from calendar quarters)

1. Navigate to the Income Tax area

Navigate to the ‘Taxes’ tab at the top of the screen and select ‘Income Tax’ from the drop-down menu.

Select the relevant tax year from the list.

2. Choose how you would like to submit expenses

HMRC allows certain businesses and landlords with an annual turnover below £90,000 to report total income and total expenses without providing full category-level breakdowns in their quarterly updates. This is known as ‘consolidated expenses’ or ‘three-line accounts’.

Be aware that, in accordance with HMRC guidance:

• If you have more than one income source that you're reporting through MTD for Income Tax, for instance you have two sole trades or you are a sole trader and also a landlord, then each income source must have turnover under £90,000 for you to be eligible to use consolidated expenses for any of your reporting.
   
• If your turnover crosses the £90,000 threshold during a tax year, you must categorise all your expenses in full from the beginning of that tax year. You would not have to re-submit any previously filed quarterly updates.

If you're eligible and would like to submit consolidated expenses rather than totals for each income and expense category, select ‘Edit tax year details’ in the top-right.

Choose ‘Consolidated expenses’ for the option ‘How would you like to submit expenses?’ and select ‘Save Changes’ at the bottom of the screen.

If you're unsure whether you're eligible to submit consolidated expenses, please ask your accountant. If you’re not currently working with an accountant, you may wish to find one through FreeAgent CoPilot.

3. Check your figures

Next, check that you’ve entered all of the relevant data for the quarter. In order to create an accurate quarterly report, FreeAgent needs to have all the details of your properties (if you have an unincorporated landlord account type), bank transactions, invoices, bills and out-of-pocket expenses.

If you're below the VAT threshold and not VAT-registered, you can leave the VAT rate as 'Auto' when explaining bank transactions or change it to 'Out of Scope'. If you leave the VAT rate as 'Auto' and then register for VAT in the future, FreeAgent will automatically reclaim the VAT on these purchases on your first VAT return if required.

FreeAgent will automatically populate your total income for the quarter in the Income section of the Self Employment page if you have a sole trader account, or the UK property page if you have an unincorporated landlord account type.

FreeAgent will also automatically populate your total day-to-day running costs for the quarter in the Expenses section of the Self Employment page if you have a sole trader account, or the UK property page if you have an unincorporated landlord account type.

If you choose to submit full expenses, you can view a breakdown of the transactions that make up a particular figure by selecting the relevant item from the Expenses list.

This will take you to the Show Transactions report filtered by tax reporting type and display all of the transactions that make up the figure for the tax year.

When you add or edit a spending category in FreeAgent, you're required to choose a tax return box for the category and to identify whether the category is allowable for tax or disallowable. Find out more about viewing the tax reporting type of an accounting category.

4. Submit your quarterly tax data to HMRC

Once you’re happy with the information, select ‘Send update’ in the top-right of the screen.

Start by selecting the period you want to report up to. You’ll see a list of any unfiled quarterly periods, along with the option to report for the year to date. The period you choose will determine which quarterly obligations are fulfilled.

If you have a sole trader account and you miss a deadline, you can submit each quarterly update in order or file a later quarter straight away, which will automatically cover any missed periods. For example, if you don’t file by the Q1 deadline, you can still submit Q1 on its own, or you can file an update for Q2 by selecting ‘Up to Q2 (06 Apr 24 to 05 Oct 25)’, and HMRC will show both Q1 and Q2 as filed.

If you have an unincorporated landlord account and miss a deadline, you can only submit a later quarter straight away, which will automatically cover any missed periods. For example, if you don’t file by the Q1 deadline, you can file an update for Q2 by selecting ‘Up to Q2 (06 Apr 24 to 05 Oct 25)’, and FreeAgent will file both Q1 and Q2.

If you need to make changes to a previous update, such as adding missing income, FreeAgent will automatically update the correct year-to-date figures in your next submission.

Once you’ve selected the relevant period, select ‘Send update’. FreeAgent will then send the totals for each income and expense category shown on the previous screen.

Once you have sent an update to HMRC, it can take several minutes for the submission to be processed by HMRC.

Once the submission has been filed successfully, you will receive an email notification from FreeAgent letting you know. You'll see a green banner at the top of the page and FreeAgent will display your annual tax estimate received from HMRC. You'll be able to log in to your HMRC business tax account to check your submissions, quarterly obligations and tax estimates.

HMRC will provide you with an annual tax estimate based on the information you’ve submitted so far. This is then extrapolated by assuming the same income and deductions for the remaining days of the tax year, forecasting your final tax liability.

Please note that under MTD for Income Tax, FreeAgent does not calculate the tax estimate figure, instead receiving this directly from HMRC, so if you have any queries regarding the tax calculation, you would need to reach out to HMRC using the contact details in the letter they would have sent you when you joined MTD. If you use FreeAgent with your accountant, they may hide the annual tax estimate in your account.

Find out how to view a breakdown of your tax estimate.

What happens next?

Once FreeAgent receives a response from HMRC in relation to your business’s submission, the software will automatically send an email to your registered FreeAgent email address to confirm whether the submission in question was accepted or rejected.

If you would prefer not to receive an email notification for these submissions, you can choose not to receive them by updating your FreeAgent communication preferences.

To do this, select ‘Settings’ from the drop-down menu in the top-right of the screen and then select ‘Communication Preferences’.

Untick the ‘Filing notifications’ checkbox in the ‘Emails’ area and select ‘Save Changes’ to complete the process.

Sending additional tax information

During the tax year you must send totals for each income and expense category to HMRC every quarter. If you wish to make your tax estimate more accurate you can send additional tax information to HMRC, such as adjustments and allowances or individual information.