MTD Quarterly Updates vs Payments on Account: July Deadline Explained

Two July Deadlines. One Big Misunderstanding.

If you are a sole trader or landlord who has just started Making Tax Digital, July is the month where two separate tax obligations land at almost the same time - and they are very easy to confuse. The 31 July Payments on Account deadline is a Self Assessment payment deadline that has existed for years. The 7 August MTD quarterly update deadline is new for 2026. They are not the same thing, they are not connected, and one does not replace the other. Both apply to you, and both need your attention. This post explains each one clearly so you can handle both without stress or error.

What Is the 31 July Payments on Account Deadline?

Payments on Account are advance payments towards your Self Assessment tax bill. HMRC asks you to make two of these each tax year - one on 31 January and one on 31 July. They are based on your previous year's tax bill and are designed to spread the cost of your tax throughout the year rather than leaving one large lump sum due in January.

The July payment is the second instalment. It covers roughly half of your previous year's tax liability. If your bill last January was £2,400 in total tax and National Insurance, your July payment on account might be around £600 (half of £1,200 in income tax, with Class 4 NI calculated separately).

This deadline has nothing to do with MTD. It is part of the existing Self Assessment system and is calculated from your previous year's tax return. Even if you have already submitted your first MTD quarterly update, you still owe this payment if HMRC has told you that you do.

What happens if you miss the 31 July payment?

If you miss the 31 July deadline, HMRC will charge interest on the unpaid amount from the due date. This is currently calculated at the Bank of England base rate plus 2.5 percentage points. There is no immediate penalty for missing a Payment on Account - but the interest adds up, and it can affect your January bill if you are not careful. Pay it as soon as possible if you have missed it.

Can you reduce your Payment on Account?

Yes. If you know your income this year is lower than last year, you can apply to reduce your Payments on Account. This is done through your HMRC online account or by contacting HMRC. Be careful though - if you reduce them too much and your actual bill is higher, you will owe the shortfall with interest in January.

What Is the 7 August MTD Quarterly Update Deadline?

The 7 August 2026 deadline is for your first MTD quarterly update under Making Tax Digital for Income Tax. This covers income and expenses from 6 April 2026 to 5 July 2026 - the first quarter of the 2026-27 tax year.

A quarterly update is a digital report submitted through your MTD-compatible software. It tells HMRC your income and allowable expenses for that quarter. It is not a payment. It does not trigger a tax bill. It is a reporting obligation - you are simply keeping HMRC up to date on how your business or rental income is progressing through the year.

If you are new to MTD and want a clearer picture of what quarterly updates actually involve, this post is a good starting point: MTD Quarterly Updates vs Full Tax Return: What's the Difference.

Who needs to submit the Q1 MTD update?

You need to submit a Q1 quarterly update if you are mandated into MTD for Income Tax from 6 April 2026. This applies to sole traders and landlords whose gross income from self-employment and property combined exceeded £50,000 in an earlier tax year. If you are already using MTD bridging software or a compatible app, your Q1 update is due by 7 August 2026.

If you are not sure whether you are in scope, check here: Do I Need to File Making Tax Digital for Income Tax? Free Checker.

What does the Q1 quarterly update include?

Your Q1 update should include the income you received and the allowable expenses you incurred between 6 April 2026 and 5 July 2026. This covers your trading income if you are a sole trader, and your property rental income if you are a landlord. If you have both, you report both through your software.

For landlords specifically: First MTD Q1 Filing: What Landlords Must Include (Property Income).

For sole traders who want to check common errors before filing: Sole Trader Q1 MTD Income Mistakes: How to Avoid Them.

Why People Confuse These Two Deadlines

The confusion is understandable. Both deadlines fall in July or early August 2026. Both involve HMRC. Both relate to your tax affairs. And there is a widespread belief - often seen in online forums and Facebook groups - that MTD replaces Self Assessment. It does not.

MTD changes how you report your income during the year. It does not change how tax is calculated or when you pay it. Payments on Account will still exist under MTD. Your final tax bill is still settled through a year-end process called the Final Declaration, which replaces the traditional tax return but still works on the same annual basis.

You can read more about how quarterly updates sit alongside the final process here: Quarterly Updates vs Final Declaration: MTD ITSA Filing Explained.

A Side-by-Side Comparison

• 31 July Payments on Account - a payment to HMRC based on last year's tax bill. Part of Self Assessment. Has existed for years. No software required. Pay via HMRC online, bank transfer, or debit card.
• 7 August MTD Quarterly Update - a digital report of your income and expenses for Q1 (6 April to 5 July 2026). New from 2026. No payment involved. Must be submitted through MTD-compatible software.

These are two different obligations with two different purposes, two different deadlines, and two different ways of handling them.

How to Handle Both Without Getting in a Muddle

Step 1: Check your Payments on Account balance first

Log into your HMRC Personal Tax Account and check what you owe for 31 July. If you have a balance due, make note of the amount and payment deadline. Pay it directly through HMRC - no software needed.

Step 2: Prepare your Q1 records separately

While you are thinking about the July payment, use that time to also check your Q1 records are in order for the 7 August MTD deadline. This means making sure your income and expenses for 6 April to 5 July are correctly recorded in your MTD software.

A pre-submission checklist is useful here: Q1 Final Checks Before 7 August: Pre-Submission Checklist.

Step 3: Do a quick reconciliation

Before you submit your Q1 update, make sure your records match what has actually come in and gone out. Bank statements, receipts, and invoices should all line up with what is in your software. If you have mixed income - both self-employment and rental - check this post: Final-Week Q1 Reconciliation: Mixed Income Check Before August.

Step 4: Submit your Q1 update through your software

Once your records are ready, submit your Q1 quarterly update through your MTD software before 7 August. If you are using AffordableMTD, you can import your income and expenses via CSV or enter them directly, then submit with a few clicks. The software handles the connection to HMRC.

Step 5: Keep evidence of both

Keep a record that you made your Payments on Account on time (a bank statement or HMRC confirmation) and a record that your Q1 update was submitted (a submission reference from your software). You may need these later, particularly if HMRC has any questions about your records.

More on what good record-keeping looks like under MTD: HMRC Record-Keeping Standards for MTD: What You Must Keep.

What About Q2? It Starts Straight After

Once you have dealt with both the 31 July payment and the 7 August Q1 update, do not take your eye off the ball. Q2 for MTD purposes runs from 6 July to 5 October 2026, and that quarter is already underway by the time your Q1 deadline arrives.

Good practice is to start tracking Q2 income and expenses from 6 July - even if the deadline is not until 7 November. Getting into a rhythm early makes each quarterly update much easier to manage.

Read more about Q2 preparation here: Q2 MTD Preparation: Start Now (July Quarter Begins 6 July).

Common Questions

Does my MTD quarterly update affect my Payments on Account?

Not directly, no. Payments on Account are based on your previous year's Self Assessment bill. MTD quarterly updates do not change how Payments on Account are calculated - at least not under the current system. In future, there is a possibility that MTD data could be used to adjust payment amounts, but that is not the case now.

I have already submitted my Q1 update. Do I still owe the July payment?

Yes. Submitting your MTD quarterly update has no effect on your Payment on Account obligation. Check your HMRC account to see what you owe and pay it by 31 July if anything is due.

What if I can't afford the July payment?

Contact HMRC as soon as possible. They have a Time to Pay arrangement that may allow you to spread the cost. Do not simply ignore it - interest accrues from the due date.

What if I miss the 7 August MTD deadline?

Late quarterly updates can result in penalty points under the new points-based system. Read more about how penalties work here: MTD Penalties Explained: What Happens If You File Late or Miss a Deadline? and Late Q1 Filing: What Happens If You Miss the 7 August Deadline.

Putting It All Together

July 2026 brings two separate tasks for many sole traders and landlords. The first is paying your second Payment on Account by 31 July - a cash payment to HMRC based on last year's tax bill, completely unrelated to MTD. The second is submitting your first MTD quarterly update by 7 August - a digital report of your Q1 income and expenses, with no payment attached. Treat them as two distinct items on your to-do list and you will not go wrong. Confuse them, or assume one covers the other, and you risk late interest or penalty points. Neither needs to be complicated if you know what each one is asking of you.