Six common misconceptions about your first Making Tax Digital quarterly update

Preparing your Making Tax Digital for Income Tax quarterly update? This article tackles six common misconceptions, from tax bills and spreadsheets to penalties and correcting mistakes. Discover what Making Tax Digital compliance really requires, how to avoid unnecessary worry and how to make the update process simple and stress-free.

HMRC's first Making Tax Digital for Income Tax quarterly update naturally raises questions for self-employed people and those with property rental income who are submitting one for the first time. It's understandable that this unfamiliar process can lead to misconceptions and assumptions. In this article, we clear up six of the most common.

The good news is that the Making Tax Digital (MTD) process is often much simpler than people expect.

Making Tax Digital common misconceptions

#1: "I need to submit every invoice and receipt."

No you don’t.

Your quarterly update isn't a list of every transaction you've made. HMRC only requires summary totals of your income and expense categories for the reporting period. You will, however, need to submit an update for each qualifying MTD income stream.

For example, if you gain income from a self-employment business and also from renting out a property, you’ll need to submit a separate quarterly update of the income and expense totals for each.

TaxNav is HMRC-recognised software and makes this process simple. TaxNav's user-friendly dashboard lets you manage multiple MTD income sources within a single account, making it easy to stay on top of each quarterly update.  You can have as many income sources within your TaxNav account (£60+VAT per year or £6+VAT per month).

#2: "My quarterly update will generate a tax bill."

No it won’t.

Submitting your quarterly update doesn't create a tax bill. Instead, HMRC generates a year-to-date estimate of your tax liability based on the information you've submitted. You'll see this estimate in your TaxNav dashboard. It's useful for budgeting, but it isn't your final tax bill and is likely to change as you submit future quarterly updates and complete your final declaration.

#3 "I need to change the way I keep my records."

Not at all.

Making Tax Digital doesn't mean you have to abandon the way you already work. If you prefer spreadsheets, you can continue using them. You simply need to connect them to HMRC using MTD-recognised software with bridging technology, such as TaxNav.

Alternatively, you can enter your income and expenses directly into our software - whichever works best for you. This can be handy if you like keeping paper records, but need to submit your income and expense totals to HMRC digitally.

#4 "I've left it too late to get software."

Not necessarily. If you haven't submitted your first quarterly update yet, there's still time to get started. Similarly, if you’ve tried alternative software and haven’t been happy with it, you can switch.

TaxNav has been supporting Making Tax Digital for Income Tax from the pilot stage and has already processed more than 600 live quarterly submissions. With a simple setup process and a 30-day free trial, it helps you get up and running quickly.

#5 "This first submission has to be perfect."

No. Quarterly updates are based on year-to-date figures. If you later discover you've made a mistake or need to make an adjustment, it can be corrected at the next future quarterly update or when you complete your final declaration.

The important thing is to make a genuine effort to keep your records up to date and submit your quarterly updates on time. Many of our MTD pilot users found that each quarterly update helped build their confidence and familiarity with the process.

#6 "I won't get a penalty if I don't submit my quarterly update."

Not quite. Yes, HMRC has relaxed the penalty regime for late quarterly updates during the 2026/27 tax year, however, you still need to submit all four quarterly updates before you can complete your final declaration.

The easement isn't intended to let people skip quarterly updates altogether. Your final declaration remains subject to HMRC's normal penalty regime.

Need a little more help?

If you're unsure what information you'll need before submitting, our guide Your first Making Tax Digital for Income Tax quarterly update: what you need before you submit explains exactly what you'll need to have ready.

Still deciding which software to use? Our guide Still looking for Making Tax Digital for Income Tax software before 7 August? explains what to look for and why choosing HMRC-recognised software now can make your first quarterly update much simpler.

TaxNav is HMRC-recognised software designed specifically for Making Tax Digital for Income Tax. Whether you prefer to enter your records manually or continue using spreadsheets, it makes preparing and submitting your quarterly updates straightforward.  

Plans are just £6 + VAT per month or £60 + VAT per year, with one subscription covering all your qualifying MTD income sources. You can also try TaxNav free for 30 days, giving you plenty of time to complete your first quarterly update with confidence.‍

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