MTD Quarterly Updates vs Full Tax Return: What's the Difference

The Short Answer

Making Tax Digital for Income Tax has caused a lot of confusion about what you report and when. Under MTD, you send quarterly updates for your self-employment and property income, then a final declaration after the tax year ends. The final declaration replaces your Self Assessment tax return. It's where all your other income - salary, dividends, savings interest, pensions and so on - is reported. You don't file a separate Self Assessment return as well.

What MTD Quarterly Updates Cover

Quarterly updates have a narrow scope. They only cover two types of income:

• Self-employment income - income and expenses from your sole trader business
• Property income - rental income and expenses from UK and foreign property

Each income source gets its own quarterly update. If you have a freelance business and two rental properties in the UK, you send one self-employment update and one UK property update each quarter.

What Goes in the Final Declaration Instead

Everything else that would have gone on your Self Assessment return goes in the final declaration, submitted through MTD software by 31 January after the tax year. That includes:

Employment Income

Salary, wages and benefits from employment (from your P60 and P11D).

Investment Income

Dividends and savings interest. ISA income is tax-free and isn't reported at all.

Capital Gains

Gains from selling assets such as shares. Residential property sales still need a separate UK property CGT return within 60 days of completion.

Other Income

Pension income, partnership profit shares, trust income and similar sources.

You also confirm your annual adjustments (capital allowances, losses, the trading or property allowance) and any reliefs, such as pension contributions or Gift Aid, before you submit.

A Mixed-Income Example

Take someone with:

• £55,000 freelance turnover (MTD quarterly updates)
• £12,000 part-time salary (final declaration)
• £2,000 dividend income (final declaration)
• £800 savings interest (final declaration)

Their qualifying income is £55,000 (the freelance turnover only), so MTD applies from April 2026. They send four quarterly updates for the freelance business, then one final declaration covering everything. There is no separate Self Assessment return on top.

If the freelance turnover had been £15,000 instead, they would be under the threshold and would keep filing a normal Self Assessment return for now. See multiple income sources and MTD for how this works with more than one source.

Why People Get Confused

Headlines about "quarterly tax" make many people think they'll pay tax four times a year or file four tax returns. Neither is true. Quarterly updates are just summaries. Your tax is still worked out once a year from the final declaration, and paid on the usual dates (31 January, with payments on account where they apply).

Timing

Quarterly updates (2026-27, standard quarters)

• Q1: 6 April to 5 July (due 7 August 2026)
• Q2: 6 July to 5 October (due 7 November 2026)
• Q3: 6 October to 5 January (due 7 February 2027)
• Q4: 6 January to 5 April (due 7 May 2027)

Our complete guide to MTD quarterly deadlines covers these dates in detail.

Final declaration

The final declaration for 2026-27 is due by 31 January 2028, the same date the old tax return would have been due. Your 2025-26 Self Assessment return (due 31 January 2027) is still filed the old way, because MTD started on 6 April 2026.

Record-Keeping

For quarterly updates

You need digital records of each business or property transaction: date, amount and category. They must reach HMRC through digital links, using HMRC's expense categories.

For the rest of the final declaration

Employment income comes from your P60 and P11D. Investment income comes from dividend vouchers and interest statements. These don't need MTD-style digital records, but keep them to complete your final declaration.

Software

Bridging software like Affordable MTD covers quarterly updates for self-employment and UK property, annual adjustments and the final declaration. Full accounting packages add bookkeeping features many sole traders and landlords never use.

When choosing, check:

• It supports each of your income sources (self-employment, UK property, foreign property)
• It can submit the final declaration
• How you'll report any other income, such as dividends or employment income (in the software, or through your HMRC online account)

Common Misconceptions About MTD Scope

"MTD means a tax return plus quarterly updates"

No. Once you're in MTD, the final declaration replaces the Self Assessment return. You file quarterly updates plus one final declaration.

"All business income goes in quarterly updates"

Only sole trader and property income does. Partnership profit shares, dividends from your own limited company and salary from it go in the final declaration. A partnership share also doesn't count toward the MTD threshold.

"MTD only covers UK property"

For UK residents, foreign property income counts toward the threshold and is reported in quarterly updates too, as a separate income source.

"Quarterly updates calculate your tax bill"

They give HMRC a running estimate only. Your actual tax is calculated from the final declaration.

What's Next for MTD

The MTD threshold is £50,000 from April 2026, falls to £30,000 from April 2027 and to £20,000 from April 2028. All three are confirmed. Qualifying income is self-employment plus property income before expenses.

Summary

MTD quarterly updates cover self-employment and property income only. Everything else - employment, dividends, interest, gains and reliefs - goes in the final declaration, which replaces your Self Assessment tax return. If you're in MTD, you file four quarterly updates per income source plus one final declaration, not a separate tax return on top.