Reconcile Your Bank Account to MTD: Before You File

Why Reconcile Before You File?

Most sole traders and landlords check their figures once, decide they look roughly right, and hit submit. Then three months later - or worse, at final declaration time - something doesn't add up. A payment appears twice. An expense got missed. Income from one month ended up in the wrong quarter. By then, unpicking it takes far longer than it should.

Reconciling your bank account to your MTD figures before you file takes most people under an hour. It catches those problems while they are still easy to fix. This guide walks you through exactly how to do it, what to look for, and what to do if the numbers don't match.

What Reconciliation Actually Means

Reconciliation just means comparing two sets of records to confirm they tell the same story. In this case, you're comparing:

• Your bank statement (what actually moved through your account)
• Your MTD figures (what you're about to report to HMRC)

If every business payment in and out of your account is reflected in your MTD quarterly update - no more, no less - your records reconcile. If there are gaps or duplicates, you have a discrepancy to sort out before filing.

This is not the same as preparing your records from scratch. By the time you reconcile, your income and expenses should already be recorded somewhere - whether that's a spreadsheet, a CSV import, or a bridging software tool like AffordableMTD. Reconciliation is the final check that what you recorded matches reality.

The Three Types of Discrepancy to Watch For

When your bank statement and your MTD figures don't match, it's almost always one of three things.

1. Missing transactions

A payment went into your bank account - or left it - but it never made it into your records. This happens when you do your bookkeeping weekly but miss a day, or when a payment arrives late in the quarter and gets overlooked. It also happens when you pay for something in cash but forgot to log it, or when a direct debit goes out on a day you weren't looking.

2. Duplicate transactions

The same income or expense appears more than once. This is common when you import a CSV from your bank and then also enter transactions manually. You end up with the same invoice counted twice. Duplicates overstate your income or your expenses depending on where they appear.

3. Wrong quarter

A transaction that belongs in Q1 has ended up in your Q2 records, or vice versa. This often happens with payments that straddle a quarter boundary - a client pays an invoice in early July for work done in June, and you record it in Q2 when it should be in Q1. MTD quarterly updates run to fixed dates, so quarter allocation matters.

For a full breakdown of how quarterly periods work and what each update must cover, see our guide on what to include in your MTD quarterly update.

The 5-Step Reconciliation Process

Work through these steps in order. Don't skip ahead to step three because you're confident - the value of reconciliation is in being systematic.

Step 1 - Pull your bank statement for the quarter

Log into your business bank account and download or print a full statement covering the quarter you're about to file. Make sure it covers the exact dates of the quarter, not just the calendar month. MTD quarters for 2026-27 run 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. Check the MTD quarterly deadlines for 2026-27 if you're unsure of the exact dates.

If you use a personal bank account for some business transactions (which HMRC would prefer you didn't), you'll need to go through that statement too and identify every business payment separately. A dedicated business account makes this step much faster.

Once you have your statement, highlight or mark every transaction that is business-related. Personal spending, transfers between your own accounts, and savings deposits are not relevant here - set those aside.

Step 2 - List your MTD figures by category

Open your MTD records - whether that's your bridging software, your spreadsheet, or wherever you've been recording income and expenses. Write out the totals for each category:

• Total income (gross receipts for sole traders, gross rental income for landlords)
• Total for each expense category you're claiming

If you're using AffordableMTD, your figures are already grouped by the HMRC-recognised categories. If you're using a spreadsheet, check that your categories align with what HMRC expects - our post on using spreadsheets for MTD explains what formats HMRC accepts.

You don't need to list every individual transaction at this stage - just the category totals. You're going to work backwards from these totals to individual transactions in step three.

Step 3 - Match each bank transaction to your records

Now go through your highlighted bank statement line by line. For each business transaction, ask: is this in my MTD records?

Put a tick next to every transaction you can find in your records. Do the same in your records - for every entry in your records, find the matching bank line. At the end, anything without a tick is a potential discrepancy.

This step takes the most time, but it's where the value is. Go slowly. Don't assume a transaction is matched just because the amounts are similar - check the dates and descriptions too.

If you have a large volume of transactions, work through income first, then expenses. Keep a running tally of unmatched items rather than trying to fix them as you go - that comes in step four.

Step 4 - Flag anything that doesn't match

Make a list of every unmatched item - both transactions on your bank statement with no corresponding record, and entries in your MTD records with no corresponding bank transaction. Note:

• The date
• The amount
• Whether it's income or an expense
• Your best guess at what it is

Don't try to explain them away at this point. Just capture them. You'll investigate in step five.

Step 5 - Resolve each discrepancy before filing

Work through your flagged items one by one. For each one, the resolution will be one of the following:

• Add it to your records - if a real business transaction is on the bank statement but missing from your MTD records, add it before you file.
• Remove a duplicate - if the same transaction appears twice in your records, delete the duplicate entry.
• Move it to the correct quarter - if a transaction belongs in a different quarter, move it. Don't include it in this filing if it's outside the quarter dates.
• Reclassify it - if an expense has been put in the wrong category, correct the category. This matters because HMRC sees your figures broken down by category, not just as a single total.
• Confirm it's not business-related - if a bank transaction turns out to be personal spending that slipped through your highlighting, exclude it and move on.

Once you've resolved every flagged item, your MTD figures and your bank statement should tell the same story. That's when you're ready to file.

What If Things Still Don't Balance?

Sometimes, after working through all five steps, your figures still don't add up. Here's what to do.

Check for timing differences

A common cause of a remaining difference is a payment that was made before the quarter end but didn't clear your bank account until after. For MTD purposes, HMRC expects you to record income when it's received - meaning when the money hits your account, not when the invoice was sent. If a client paid you on 4 July for work done in June, that income belongs in Q2, not Q1.

Check whether any of your unmatched transactions are actually timing differences like this. If so, they belong in a different quarter, not the current one.

Check for non-bank business income

Not all business income goes through a bank account. Cash payments, for example, won't appear on a bank statement - but they still count as income and must be included in your quarterly update. If your MTD income total is higher than your bank statement total, that's one likely explanation. You should have a record of any cash income separately.

For more on what records you need to support figures that don't appear on bank statements, see our guide on what proof HMRC needs for expenses.

Check for bank transfers you've counted as income

Transfers between your own accounts - for example, moving money from your business account to a savings account or to cover personal bills - are not income. They should not appear in your MTD records. If they've been included by mistake, remove them.

When you genuinely can't trace the difference

If you've worked through all of the above and there's still a small unexplained difference, don't fabricate a transaction to make the figures balance. Instead, check whether you have any supporting documents - invoices, receipts, bank notifications - that could help identify what the amount relates to. If it's a business expense you can't find a receipt for, our post on backup records for MTD quarterly updates covers what supporting evidence you can use.

If the difference is material and you genuinely can't identify it, it may be worth speaking to an accountant before filing.

Reconciliation for Landlords: Extra Things to Check

Landlords have a few extra items to look at during reconciliation, because rental income doesn't always behave like straightforward business income.

Deposits

A tenancy deposit is not income. If a new tenant paid a deposit during the quarter and it went into your bank account, it should not appear in your MTD income figures. Check that it hasn't been included by mistake. Our post on rental income reconciliation for landlords covers this in detail.

Rent paid in advance

If a tenant pays two months' rent in advance, and part of that advance covers the next quarter, only the portion relating to the current quarter should be included in this quarterly update. Allocate income to the correct period.

Allowable expenses

Not every payment that leaves your landlord bank account is an allowable expense for MTD. Some repairs may actually be capital improvements, which are treated differently. Check our post on landlord repairs vs capital works if you're unsure about anything you've claimed.

Reconciliation for Sole Traders: Extra Things to Check

Mileage and cash expenses

If you claim mileage using HMRC's simplified rates, there won't be a bank transaction for it - you're claiming a rate per mile, not the actual fuel cost. Make sure your mileage log supports the figure in your records, and that you haven't also claimed actual fuel costs for the same journeys. See our guide on mileage allowances for MTD.

Mixed-use expenses

If you use something for both business and personal purposes - your mobile phone, your home broadband, a vehicle - only the business proportion is allowable. The full payment will appear on your bank statement, but only part of it should be in your MTD records. Check that your records reflect the business percentage, not the full amount. Our post on mixed-use expenses and MTD explains how to work out the right percentage.

How Long Does Reconciliation Take?

For most sole traders and landlords with straightforward finances, working through the five steps above takes between 30 and 90 minutes per quarter. That includes pulling the statement, going through transactions, and resolving any issues that come up.

It takes longer the first time because you're also building familiarity with the process. By Q3 or Q4, most people find it much faster because they've ironed out the recurring issues.

The time investment is worth it. Filing a quarterly update that doesn't reflect your actual finances creates problems further down the line - either at final declaration or, worse, during an HMRC compliance check.

Before You File: A Quick Pre-Submission Check

Once reconciliation is complete, run through this final check before you hit submit:

1. Does your total income in your MTD records match the total business income on your bank statement (adjusted for cash income and timing differences)?
2. Does every expense in your MTD records have a corresponding bank transaction or a clear supporting record?
3. Have you checked that deposits, personal transfers, and non-business payments are excluded from your figures?
4. Are all transactions in the right quarter?
5. Have you removed any duplicates?

If you can answer yes to all five, your reconciliation is complete. You're ready to file.

For a broader pre-submission checklist covering allowances, adjustments, and other filing checks, see our post on Q1 final checks before submission.

Reconciling Your Records Is the Most Important Step Before Filing

A quarterly update that doesn't reflect your actual bank activity isn't just a compliance risk - it's a record-keeping problem that compounds over time. Each quarter you don't reconcile, the harder it becomes to unpick at final declaration. Doing it consistently, before every submission, keeps your records clean and your filing accurate. It doesn't require accounting knowledge. It requires a bank statement, your MTD records, and an hour of careful attention.