How Accurate Do My MTD Income Tax Quarterly Updates Need to Be?

One of the requirements for those affected by Making Tax Digital Income Tax is to keep digital records and share these with HMRC by submitting quarterly updates throughout the year.

These updates aren’t the same as tax returns, but they are supposed to reflect your bookkeeping, so accuracy is still important. Given HMRC expects businesses to take record-keeping seriously, it makes sense that your quarterly updates should be based in reality.

In this article we explain what your MTD Income Tax quarterly updates should include, and what happens if you need to change anything.

Who needs to send quarterly updates for MTD Income Tax?

MTD for Income Tax (MTD for IT) means some people will no longer need to submit a traditional Self Assessment tax return, and will instead be required to keep their income tax records digitally and submit updates to HMRC on a more regular basis.

You’ll need to start using MTD IT and send quarterly updates:

What should my quarterly updates include?

The confusing bit is that your quarterly updates only need to include your “qualifying income” instead of everything.

So, you have to keep digital records of any income and expenditure which relates to self-employed sole trader activities, and (or) rental income you get from property.

Then, at the end of each quarter, you must send a summary of these details to HMRC.

What about any other income I need to report?

Your quarterly updates only need to include your self-employed and property income. If you get other income during the year, such as from dividends or because you work for someone else too, this will go on your MTD Income Tax return, known as a final submission. This bit is separate to the four quarterly updates you send during the year!

When do I need to send them?

The deadlines for each quarterly update are:

Do MTD Income Tax quarterly updates need to be precise?

Your quarterly updates are just – a summary of some of your income to give HMRC a quick snapshot throughout the year. They’re not tax returns.

BUT.

Make them as accurate as you can. Your quarterly updates are basically a compilation of your bookkeeping – and this should be as accurate as possible.

If you submit your quarterly update and then realise something was missed, or if something changes in the meantime, simply correct the mistake and it will be included when you send your next quarterly update.

Why does it matter?

Well, aside from giving you peace of mind, and the fact that HMRC are likely to scrutinise any tax returns which look wildly different from their supporting quarterly updates, it will also make your life easier down the line.

Keeping up-to-date, detailed and accurate records throughout the year is a terrific starting point you can refer back to when it comes time to complete your end-of-year tax return.

This means you can avoid a mad scramble right before the deadline, trying to find old receipts and invoices.

Staying up to date

OK, so we make digital bookkeeping software so we’re obviously big fans of it. But keeping your records up to date also gives you an opportunity to regularly check in on your business’s financial health. It’s like an early warning system you can use to spot areas for improvement and nip potential problems in the bud.

It will then allow you to make better decisions throughout the year. We can’t help you decide what’s for dinner though.

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.