What Goes in a Quarterly Update - and What Doesn't

If your first MTD quarterly update deadline is coming up and you're staring at a blank screen wondering what you're actually supposed to file, you're not alone. Most first-time filers spend more time worrying about whether they're including the right things than they do on the numbers themselves. This post cuts through that. It tells you exactly what must go into each quarterly update, what's optional at this stage, and - just as importantly - what should not be in there at all.

The Purpose of a Quarterly Update (in Plain English)

A quarterly update is not a full tax return. It's a summary of your business income and expenses for a specific three-month period. You're not paying tax based on it. You're not finalising anything. You're simply telling HMRC: "Here's what came in and what went out during that period."

The purpose is to keep a running picture of your finances across the year so that your final declaration at the end of the tax year is accurate and straightforward.

That's it. Nothing more complex than that.

Note: If you're new to MTD entirely and want to understand the wider picture first, read What Is Making Tax Digital for Income Tax? before continuing.

The Four Things Every Quarterly Update Must Include

Every quarterly update - whether you're a sole trader, a freelancer, or a landlord - needs four things. No more, no less.

1. The Reporting Period

Each quarterly update covers a fixed three-month period tied to your MTD start date. For most people starting on 6 April 2026, the first quarter runs from 6 April to 5 July 2026. Your software should pre-populate this automatically, but it's worth double-checking that you're filing for the right period before you submit.

The deadlines for submitting each quarter are fixed. Every quarterly deadline for 2026-27 is listed here if you want to plan ahead.

2. Your Gross Income for the Period

"Gross income" means the total amount you received (or earned) from your business or property before any expenses are deducted. This is sometimes called "turnover" in older tax guidance, but HMRC now refers to it as income in the MTD context.

For sole traders and freelancers, this includes:

For landlords, this includes:

If you have both types of income, you report them separately. HMRC treats self-employment income and property income as two distinct income sources, each with its own quarterly update. See Mixed Income MTD: Which Expenses Count for Self-Employment vs Property for more detail on keeping those apart.

3. Your Allowable Expenses for the Period

"Allowable expenses" are business costs you can deduct from your income to reduce the profit figure you're taxed on. You report the total spent in each expense category - you don't attach receipts at this stage, though you must keep them.

For sole traders, common categories include:

For landlords, the main expense categories are:

For a full breakdown of what landlords can and can't claim, see What Counts as a Landlord Expense in Your Q1 MTD Quarterly Update. Sole traders can find a broader overview in Allowable Expenses for MTD: What You Can Claim as a Sole Trader or Landlord.

4. Your Profit or Loss for the Period

Your quarterly update calculates your profit or loss automatically once income and expenses are entered. Profit is simply income minus allowable expenses. If expenses exceed income, you have a loss for that period.

You don't need to do this calculation yourself if you're using bridging software - it's worked out for you. The important thing is that the underlying income and expense figures are accurate.

What Does NOT Go into a Quarterly Update

This is where first-time filers often get confused. Several things that appear in a traditional set of accounts do not belong in a quarterly update.

Personal Drawings

If you pay yourself from your business bank account, that is not an expense. It doesn't reduce your taxable profit. As a sole trader, there's no legal separation between you and your business, so money you take out is simply you using your own money - not a business cost. Do not include drawings anywhere in your quarterly update.

Capital Purchases

Buying a laptop, a van, or any equipment with a useful life of more than a year is a capital purchase. These are not allowable expenses in the same way that day-to-day running costs are. Capital allowances (the mechanism for claiming relief on capital purchases) are dealt with at the end-of-year final declaration stage, not in quarterly updates.

The exception is if you use the Annual Investment Allowance or the simplified cash basis treatment for capital items - but even then, these adjustments are handled at year-end, not quarter by quarter.

Warning: Including capital purchases as regular expenses is one of the most common errors in early MTD filings. A new computer is not the same as a box of printer paper. If you're unsure how to treat a significant purchase, keep a note of it and deal with it at the final declaration stage.

VAT (If You're VAT Registered)

If you're VAT registered, your quarterly update figures should use net amounts - that is, amounts excluding VAT. The VAT element is handled separately through your VAT return. Include only the net income you received and the net cost of your expenses.

Personal Expenses with No Business Element

Grocery shopping, personal travel, home broadband used entirely for personal use, gym memberships (unless you're a personal trainer and it's a genuine business cost) - none of these belong in your quarterly update. The rule is straightforward: only costs incurred wholly and exclusively for the purposes of your business can be included.

If something is partly personal and partly business (your home broadband, for example), you can include the business-use proportion only. Keep a note of how you calculated that split in case HMRC ever asks.

Payments on Account

Payments on account are advance payments toward your income tax bill. They are not business expenses and have nothing to do with your quarterly update figures. If you want to understand how they relate to MTD, there's more detail in MTD Quarterly Updates vs Payments on Account: July Deadline Explained.

Loan Repayments (Capital Element)

If your business has a loan, the interest element may be an allowable expense. The capital repayment (the portion of each payment that reduces the loan balance) is not an expense and does not go into your quarterly update.

A Note on the Trading Allowance

If your gross income from self-employment is below £1,000 in a tax year, you may be able to use the trading allowance instead of claiming actual expenses. This means you deduct £1,000 as a flat amount rather than listing individual costs. However, you cannot use the trading allowance and also claim actual expenses - it's one or the other.

This is worth understanding before your first quarterly update if your income is modest. Trading Allowance for Sole Traders: MTD Q1 Explained covers the rules in full.

What About Mileage?

If you use a personal vehicle for business trips, you can claim a flat rate per mile instead of logging actual vehicle costs. This is called the simplified mileage rate (currently 45p per mile for the first 10,000 miles, then 25p). You enter this as an expense in the travel category of your quarterly update.

You must keep a mileage log - dates, destinations, reasons, and distances. You cannot claim both mileage rate and actual vehicle running costs for the same vehicle in the same tax year. Mileage Allowances for MTD: Claiming Simplified Rates in Q1 has the details.

How Expenses Are Categorised

HMRC uses a standard set of expense categories for MTD. When you file your quarterly update, your income and expenses need to be mapped to those categories. Most MTD bridging software will either categorise them for you or let you select from a list.

If you've been keeping records in a spreadsheet and want to import them, Import Your Expenses Fast: CSV Upload and AI Categorisation Guide explains how that process works in practice.

For a breakdown of which expenses belong in which category - particularly if you have both self-employment and rental income - see Mixed Income MTD: Which Expenses Count for Self-Employment vs Property.

What You Don't Need to Submit (Yet)

Quarterly updates do not include:

All of these are declared once, at the end of the year, through your final declaration. That's the equivalent of what used to be your annual self assessment tax return. Quarterly updates are only about your business or property income and expenses - nothing else. MTD Quarterly Updates vs Full Tax Return: What's the Difference explains this distinction clearly if you want more detail.

Do You Need to Match Every Figure to a Receipt?

Not at the point of submission. Your quarterly update is a summary. HMRC does not require you to upload receipts or invoices as part of filing. However, you are legally required to keep the underlying records - receipts, bank statements, invoices - in case HMRC asks for them later. HMRC Record-Keeping Standards for MTD: What You Must Keep sets out what that means in practice.

The golden rule: file the summary, keep the evidence.

A Quick Summary Before You File

Here's what your quarterly update needs:

  1. The correct reporting period (check the dates match your quarter)
  2. Total gross income received or earned in that period
  3. Allowable business or property expenses, split by category
  4. The resulting profit or loss (calculated automatically by your software)

And what it should not include: personal drawings, capital equipment purchases, the VAT element of any figures (if you're VAT registered), personal expenses, loan capital repayments, or any income from employment, savings, or investments.

If you're still not sure whether a specific cost is allowable, the safest approach is to leave it out of the quarterly update, make a note, and raise it when you complete your final declaration - ideally with professional advice if the amount is significant.

Getting the basics right in your first quarterly update makes everything that follows easier. The categories don't change, the structure doesn't change, and once you've done it once, the next three quarters are simply a repeat of the same process.

Ready to file your first quarterly update?

AffordableMTD is HMRC-recognised bridging software built for sole traders and landlords filing on their own. Enter your income and expenses, and it handles the submission for you - no accountant needed.

Get Started Free