What goes in an MTD quarterly update: categories explained
Short answer: A quarterly update is a set of totals: income and expenses, in HMRC’s categories, for each business you run. You do not send receipts, and you do not need to make tax adjustments first. Allowances, adjustments and other income sources are dealt with at year end.
The basics
GOV.UK says Making Tax Digital for Income Tax uses the same categories of income and expenses as Self Assessment. The full list sits in HMRC’s quarterly update direction. Each total is cumulative from 6 April, as explained in cumulative quarterly updates.
You send one set of totals per business. A sole trader with a plumbing business and a UK rental property sends two updates in each period. All UK rental properties count as one property business.
Your software may label the boxes slightly differently from the wording below.
Self-employment
| HMRC category | Plain-English examples |
|---|---|
| Turnover | Sales, fees, takings, invoices paid to you |
| Other business income | Grants, scrap sales, income that is not your main trading sales |
| Cost of goods bought for resale or goods used | Stock, materials, ingredients |
| Construction industry, payments to subcontractors | Payments to subcontractors in the construction trade |
| Wages, salaries and other staff costs | Employees’ pay, employer’s NIC, pension contributions |
| Car, van and travel expenses | Fuel, parking, train fares, vehicle insurance and repairs |
| Rent, rates, power and insurance costs | Workshop rent, business rates, electricity, business insurance |
| Repairs and maintenance of property and equipment | Fixing tools, equipment and premises |
| Phone, fax, stationery and other office costs | Mobile bill, printer ink, postage, software subscriptions |
| Advertising | Online ads, flyers, website costs |
| Business entertainment costs | Client meals and hospitality |
| Interest on bank and other loans | Interest on a business loan or overdraft |
| Bank, credit card and other financial charges | Card fees, bank charges, payment processor fees |
| Accountancy, legal and other professional fees | Accountant, solicitor, trade body fees |
| Other business expenses | Anything allowable that fits nowhere else |
These 15 boxes are the list in HMRC’s quarterly update direction. Some software also shows boxes for depreciation or irrecoverable (bad) debts, because HMRC’s technical interface accepts them, but they are not in the direction’s list. GOV.UK also says you cannot claim depreciation of equipment as an allowable expense.
UK property
| HMRC category | Plain-English examples |
|---|---|
| Total rent | Rent received from tenants |
| Other income from property | Charges for services, fees from tenants |
| Premiums for the grant of a lease | Lump sums paid for the grant of a lease |
| Reverse premiums and inducements | Payments to you for taking on a lease |
| Rent, rates, insurance and ground rents | Landlord insurance, ground rent, service charge items |
| Property repairs and maintenance | Fixing a boiler, repainting, replacing a broken window |
| Non-residential property finance costs | Interest and fees on loans for commercial property |
| Residential property finance costs | Mortgage interest on residential lets |
| Residential finance costs brought forward | Unused finance costs carried over from earlier years |
| Legal, management and other professional fees | Letting agent fees, accountant, legal fees for a tenancy |
| Costs of services provided, including wages | Cleaning, gardening, a caretaker |
| Travel expenses | Trips to inspect or maintain the property |
| Other allowable property expenses | Anything else allowable |
Residential finance costs are a special case. For residential lets, GOV.UK says you must still record whether an expense is a restricted finance cost.
Consolidated expenses under £90,000
If you want less detail, you can record your expenses as one total in some cases. GOV.UK says this applies where turnover from a source of self-employment is under £90,000, or total UK property turnover is under £90,000. If you have more than one source, each one must be under the limit. Sole traders can simply mark each transaction as income or expense (see spreadsheets and bank statements for what a record must hold). HMRC’s developer guidance says businesses under £90,000 can then send their expenses as a single total in the quarterly update.
If turnover reaches £90,000, you must categorise all records for that source in full, including earlier records from that tax year, before you can send the next update. The £90,000 limit is not applied to foreign property income. GOV.UK advises that if you are unsure whether you will reach £90,000, you should categorise in full from the start.
What is not in a quarterly update
- Allowances and reliefs. Trading income allowance and capital allowances are dealt with once the fourth update has been sent. HMRC will not process a capital allowances claim until your tax return is submitted.
- Tax adjustments. GOV.UK says you do not need to make accounting or tax adjustments before a quarterly update.
- Other income. Savings interest, for example, is not part of the quarterly categories. You can add it in your software for a better tax estimate, or before you send your tax return.
- PAYE income and pensions. HMRC already holds employment details.
Rent-a-Room is the exception: GOV.UK says income can be included in each update if you record it, or added by resending the fourth update after year end.
Private use and disallowable expenses
GOV.UK describes disallowable expenses as costs that are not for business use, so they cannot be claimed. You do not have to record them, but you can. You can record only the business portion, record the full amount and the disallowable part separately, or record the full amount and reduce the category total.
Example: Jo, a self-employed tutor, pays a £40 phone bill. Half is personal use. Jo either records £20 as a phone expense, or records £40 and later reduces the category by £20. The method is a matter for your software and your records; the aim is that only business use is claimed.
For jointly let property, there are separate options. See MTD for jointly owned property. Wondering whether you need MTD at all? Try the MTD checker.
Sources
This guide is general information, not tax or legal advice. Rules can change: check GOV.UK or speak to an accountant about your situation. SendMTD is not affiliated with HMRC.