Making Tax Digital Quarterly Updates Explained: What Landlords Actually Submit

What is a quarterly update under Making Tax Digital?

A quarterly update is a digital summary of rental income received and expenses paid during a three-month period. It is submitted through MTD-approved software directly to HMRC. It is not a tax return, a formal set of accounts, or a payment trigger.

Think of quarterly updates as progress reports. Rather than waiting until January to tell HMRC what happened across the entire tax year, MTD requires you to report in four smaller instalments. This allows HMRC to track your financial position in near real-time throughout the year and show you a running estimate of what your tax bill might be.

What a quarterly update is:

• A summary of gross rental income received in the quarter
• A summary of allowable expenses paid in the quarter
• Submitted digitally through HMRC-approved software
• A reporting obligation, not a payment obligation

What a quarterly update is not:

• A full tax return
• A formal set of accounts
• A payment trigger — no tax is due at the quarterly stage
• A final calculation of your tax liability
• A document you can attach receipts or invoices to

Corrections are allowed. If you make an error in one quarter — a transaction categorised incorrectly, a receipt missed — you can correct it in the next quarterly update or at the End of Period Statement stage at year-end. HMRC understands that quarterly updates are working figures, not audited accounts.

The four MTD quarterly periods for landlords

There are four quarterly periods in each tax year, running from April to April. Each quarterly update is due one month after the quarter ends.

You have exactly one month from the end of each quarter to submit. For the first year of MTD (from April 2026), the deadlines are:

Alternative quarterly periods: HMRC is consulting on whether to allow calendar-month aligned quarterly periods (January–March, April–June, etc.) in addition to the tax-year aligned periods above. This would simplify things for landlords who prefer to work on a calendar-year basis. Check GOV.UK for the latest guidance as this develops.

The quarterly deadlines apply regardless of whether you are using an accountant. If your accountant submits on your behalf, ensure they have your records well before the deadline date.

What income goes into a quarterly update?

Quarterly updates include gross rental receipts received during the quarter, split by property if you track at that level. Income is reported when received (cash basis), not when it becomes due.

Income types that go into a quarterly update:

• Rent received from tenants during the quarter
• Service charges received from tenants (where you collect and forward)
• Any other income from letting the property (e.g. storage fees, parking income)

Income types that do NOT go into a quarterly update:

• Security deposits received (not income — they must be returned at tenancy end)
• Capital receipts (proceeds from selling the property)
• Insurance claim payments for property damage (these offset expenses, not additional income)
• Compensation payments not related to the rental income stream

Cash basis versus accruals basis: Most individual landlords use the cash basis — reporting income when they actually receive it rather than when it contractually falls due. Under cash basis, if your tenant pays December's rent in January, it appears in Q3 (October–January period), not Q2. HMRC defaults to cash basis for most landlords and it is generally simpler to apply.

If you choose accruals basis instead (where income is reported when it is contractually due, regardless of when it is received), ensure your software is configured accordingly and apply it consistently throughout the year.

Rent arrears: Under cash basis, you only report rent you have actually received. If a tenant is in arrears, that income does not appear in the quarterly update until it is paid. This is one practical advantage of cash basis for landlords dealing with arrears situations.

What expenses go into a quarterly update?

Quarterly updates include allowable property expenses paid during the quarter. HMRC specifies seven categories that all property expenses must be allocated to.

HMRC's seven property income expense categories for MTD are:

Important note on mortgage interest (Section 24): Residential landlords cannot deduct mortgage interest as a direct expense. Instead, they receive a 20% basic rate tax credit on finance costs. Your software handles this correctly if finance costs are categorised in the Finance costs category — the tax credit calculation happens at the Final Declaration stage, not in the quarterly update itself.

Replacement Domestic Items Relief (RDRI): If you replace a like-for-like domestic item (washing machine, sofa, curtains), the cost qualifies for RDRI. This is different from capital expenditure on improvements. Your software may have a specific category for RDRI — if not, use Repairs and maintenance.

What you do NOT need to include in quarterly updates

Several items that affect your final tax calculation are deliberately excluded from quarterly updates. They are handled at the End of Period Statement or Final Declaration stage instead.

The following do not go into your quarterly update submissions:

Capital expenditure: Money spent on improving rather than maintaining a property — a new extension, loft conversion, upgrading to a better kitchen — is capital expenditure. It is not an allowable revenue expense and does not belong in quarterly updates. Capital allowances and improvements are handled at the EOPS stage.

Depreciation: HMRC does not allow depreciation as a deductible expense for property income. Do not include it.

Personal expenses: Any private use element of expenses must be excluded. If you use your personal vehicle for both private journeys and property-related travel, only the property-related proportion is allowable.

Deposit refunds: Returning a tenant's deposit is not an expense. It was never income, so it cannot be an expense either.

Loan capital repayments: Only the interest portion of a mortgage payment is relevant to income tax. The capital repayment portion reduces your mortgage balance and is not a tax-deductible expense.

Private use adjustments: If you personally use a property for part of the year (e.g. a holiday let that you also use yourself), an adjustment must be made to exclude the private use period. This adjustment is made at the EOPS stage, not in quarterly updates.

Annual investment allowances and capital allowances: These are year-end claims made in the EOPS, not included in quarterly expense figures.

Keeping these items out of your quarterly updates simplifies the process significantly. Quarterly updates are deliberately designed to require only the straightforward day-to-day income and expense data.

The quarterly update process step by step

Submitting a quarterly update through MTD software takes 15–30 minutes if your records are current. Here is the complete process from start to confirmation.

1. Ensure your records are up to date in your software. The week before the deadline, go through your records and confirm all income received and expenses paid during the quarter are logged correctly with the right dates, amounts, and categories. If you keep records weekly throughout the quarter, this step is minimal.
2. Review income and expenses for the quarter. Open the quarterly summary in your software. Check that the income total matches what you received — cross-reference against your bank statements if needed. Check that each expense entry looks right.
3. Confirm categorisation. Check that each expense is in the correct HMRC category. Good software will have categorised transactions automatically based on your settings. Spot-check a sample of entries to verify the categories are correct.
4. Review the submission summary. Your software will show you a summary of what will be submitted: total income, and a breakdown of expenses by category. This is what HMRC will see. Check the figures look reasonable before proceeding.
5. Submit digitally to HMRC through software. Click submit (the exact wording varies by software). The software sends the data directly to HMRC through the MTD API.
6. Receive HMRC confirmation. HMRC acknowledges receipt, usually within seconds. Your software will display a confirmation message and typically log the submission date and reference. Keep a record of this confirmation.

That is the complete process. No tax calculation required at this stage. No payment. No further action until the next quarter — unless you realise you have made an error, in which case you correct it in the next update.

How long it actually takes: Landlords who keep records up to date weekly find quarterly updates take 15–20 minutes. Those who let records build up for three months before submitting find it takes 2–3 hours. The time investment is in the ongoing record-keeping, not the submission itself.

Does submitting a quarterly update create a tax liability?

No. Quarterly updates are informational only. Submitting them does not trigger a tax payment or crystallise a tax liability. Your actual tax bill is calculated and due through the Final Declaration on 31 January.

This is one of the most important points to understand about MTD quarterly updates. The additional reporting burden is real — four submissions per year instead of one — but the payment structure is unchanged from the current Self Assessment system.

The estimated tax figure: After each quarterly update, HMRC may show an estimated tax figure in your HMRC online account. This is purely a projection based on your income reported to date. It assumes your income continues at the same rate for the rest of the year. It is not a bill, and it has no legal status until the Final Declaration is submitted.

Do not panic if the estimated figure looks high. It will be recalculated when:

• You submit subsequent quarterly updates (with income that varies between quarters)
• You complete the End of Period Statement with year-end adjustments
• You submit the Final Declaration with all income sources and reliefs included

Payment on account: Your existing payment on account obligations are unchanged by MTD. You continue to pay 31 January (balancing payment plus first payment on account for the next year) and 31 July (second payment on account). The quarterly update process has no effect on these payment dates or amounts.

What if you make a mistake in a quarterly update?

Mistakes in quarterly updates can be corrected in the next quarterly update or at the End of Period Statement stage. HMRC expects corrections — quarterly updates are working figures, not audited submissions.

Minor errors: Transpositions, miscategorised expenses, a missed income entry — these can be corrected in the following quarter's update. Your software will show cumulative totals, and the correction will simply adjust the running figure.

Larger errors: If you realise you have significantly overstated or understated income for a quarter, correct it as soon as possible. You can amend a submitted quarterly update through your software in some cases, or make the correction in the next quarter.

At year-end: The End of Period Statement (EOPS) is where you finalise all figures before the Final Declaration. If there are any outstanding corrections from the quarterly updates, the EOPS is the formal opportunity to resolve them before you sign off the year.

HMRC has made clear that it understands quarterly updates are summary figures submitted regularly, not formal accounts. The system is designed to accommodate corrections. The important thing is that errors are identified and corrected — not that every quarterly update is perfect at point of submission.

Quarterly updates for multiple properties

All UK residential rental properties are combined into a single UK property business for HMRC purposes. Your quarterly update reports the combined totals across all your properties, not a separate return per property.

HMRC does not require — and cannot receive — separate quarterly updates per property. You report your total UK property income as a single business:

• Total gross rent received across all properties during the quarter
• Total allowable expenses across all properties during the quarter

This does not mean you should not keep property-level records — you absolutely should, for your own management and to identify which properties are profitable. Good MTD software (including LandlordOS) tracks income and expenses per property internally but presents the combined totals when it is time to submit to HMRC.

Overseas properties: If you have overseas rental property income, this is reported as a separate income source from UK property. You will have a separate quarterly update (and EOPS) for overseas property income.

Furnished Holiday Lets: The FHL regime was abolished from April 2025. Former FHL properties are now treated as regular UK residential lettings and combined with your other UK property income for MTD purposes.

HMOs and multi-unit properties: Houses in Multiple Occupation and properties with multiple units are treated as a single property for MTD purposes. The combined income from all rooms/units in the same property is reported as one figure.

What if you miss a quarterly deadline?

Late quarterly updates generate penalty points. Four points trigger a £200 fine. In 2026/27, HMRC is applying a soft landing — no penalty points for late quarterly updates in the first year of MTD. From 2027/28, the points system applies in full.

The points-based penalty system:

How points expire: Penalty points expire if you achieve a period of full compliance (submitting all updates on time) for 24 months. Once all points have expired, your count resets to zero.

The 2026/27 soft landing: HMRC has confirmed a soft landing approach for the first year of MTD (2026/27). Late quarterly updates in 2026/27 will not generate penalty points. This gives landlords time to establish their processes without the risk of accumulating penalties.

Important: The soft landing applies to quarterly update penalties only. It does not apply to the Final Declaration (which must still be submitted by 31 January 2028 for the 2026/27 tax year) or to late payment penalties on tax owed.

Even with the soft landing, it is sensible to submit on time from the start. Building good habits in 2026/27 means you are not scrambling to avoid penalties from 2027/28 onwards.

Quarterly updates and cash basis versus accruals basis

Most individual landlords use cash basis for their quarterly updates, reporting income when received and expenses when paid. Cash basis is HMRC's default for property income and is simpler to apply.

The choice between cash basis and accruals basis affects when transactions appear in your quarterly updates:

Cash basis:

• Report income when you actually receive the rent payment
• Report expenses when you actually pay them
• Simpler, especially for landlords without complex accounting arrangements
• Handles arrears naturally — you only report what you have actually received
• HMRC's default for most individual landlords

Accruals basis:

• Report income when it is contractually due, regardless of when it is received
• Report expenses when the liability is incurred, not when you pay them
• More complex to manage but can be better for landlords with significant arrears or who want to match costs to the period they relate to
• Required if your property income exceeds certain limits or if your accountant advises it

For most self-managing landlords with one to five properties, cash basis is the practical choice. Your MTD software will typically default to cash basis and the prompts and categories within the software will reflect this.

If you switch basis (from cash to accruals or vice versa), you can only do so at the start of a new tax year. Consult a tax adviser before switching, as there can be transitional adjustments required.