The Fear That’s Keeping You Awake
“If I have to submit quarterly updates, does that mean I’ll have to pay my tax four times a year instead of once?”
This is the biggest fear we hear from sole traders and landlords about Making Tax Digital. The thought of splitting your tax payments into four quarterly chunks is genuinely terrifying for many business owners already struggling with cash flow.
Here’s the good news: this fear is completely unfounded.
✅ REALITY: MTD Changes Reporting, Not Payment Dates
MTD changes when you report your income and expenses through quarterly updates, but your tax payment dates remain exactly the same. You’ll still pay your tax on:
- 31st January: Balancing payment + first payment on account
- 31st July: Second payment on account
These dates are identical to the current Self Assessment system.
What Actually Changes vs. What Stays the Same
CHANGES (Reporting):
- Submit quarterly updates (4 times per year)
- Keep digital records throughout the year
- Annual finalization instead of traditional tax return
STAYS THE SAME (Payments):
- Pay tax twice a year (31st Jan & 31st July)
- Same payment on account system
- Same annual tax settlement process
Understanding the Difference: Updates vs. Payments
This is where the confusion comes from. Let me explain what quarterly updates actually are:
Quarterly Updates Are:
- Cumulative year-to-date figures showing total income and expenses accumulated from the start of the tax year up to that point for each self-employment and property income source
- Simple summaries of your business performance
- Progress reports, not tax calculations
- No payment requests attached
Quarterly Updates Are NOT:
- Tax bills or payment demands
- Final tax calculations
- Separate quarterly tax assessments
Think of them like sending a monthly progress report to a client – it shows where you are, but doesn’t trigger any payment.
The Hidden Benefits: Why This Change is Actually Good for You
While MTD might seem like extra work, the quarterly reporting system offers genuine business advantages:
Better Cash Flow Planning
- Q1 Update (August): Early warning of your tax position
- Q2 Update (November): Mid-year financial health check
- Q3 Update (February): Plan for July payment
- Q4 Update (May): Prepare for next January payment
Greater Business Insights
By keeping digital records throughout the year, sole traders and landlords can save hours previously spent gathering information at tax return time – allowing them to spend more time focusing on their business activities.
More Accurate Tax Estimates
Instead of guessing your tax liability all year, you’ll have a clear view of your tax position every quarter. No more January surprises!
Reduced Year-End Stress
Quarterly updates will spread the workload more evenly throughout the year, bring the tax system closer to real-time reporting and help businesses stay on top of their finances and avoid the last-minute rush.
Real-World Example: Sarah’s Property Business
Current System:
- Does bookkeeping once a year in January
- Discovers £8,000 tax bill (shock!)
- Scrambles to find money by 31st January
- Pays in full, struggles with cash flow
MTD System:
- Reviews finances quarterly
- Sees tax building up gradually
- Saves £2,000 per quarter
- Same payment dates, but better prepared
- Uses quarterly insights to make better rental decisions
How MTD Will Actually Make Your Life Easier
Time Savings Through Efficiency
These digital requirements will help businesses save time through more efficient record-keeping, reduce errors in tax calculations, and provide a clearer picture of their tax obligations throughout the year.
Better Business Decision Making
With quarterly financial snapshots, you can:
- Spot trends in your income earlier
- Identify problem areas before they become serious
- Make informed decisions about expenses and investments
- Plan business growth more effectively
Reduced Errors and Penalties
Regular quarterly reviews mean you’ll catch mistakes early, before they compound into bigger problems at year-end.
Getting Started: Turn This Fear into an Opportunity
HMRC is urging eligible customers to sign up to a testing programme on GOV.UK and start preparing now. This is your chance to:
- Practice without pressure – testing phase has no quarterly penalties
- Get comfortable with the system before it becomes mandatory
- Access dedicated support from HMRC’s MTD team
- Discover the business benefits for yourself
The Bottom Line: Your Wallet Won’t Notice the Difference
Around 780,000 self-employed individuals and landlords will be required to use MTD for Income Tax from April 2026, but none of them will see their payment dates change.
What This Means for You:
- Same tax liability calculations
- Same payment dates you’re used to
- Same annual tax settlement process
- PLUS better visibility and control over your finances
Stop Worrying, Start Benefiting
MTD isn’t about extracting more money from you – it’s about giving you better control over your business finances. The quarterly reporting system is designed to help you manage your tax obligations more effectively, not make them more burdensome.
Instead of fearing quarterly updates, embrace them as a tool for better business management. You’ll have the same payment dates, but with much better insight into your financial position throughout the year.
Contact AHBS Limited: 0115-932-9888 or book: https://tidycal.com/simonahbs/mtd
