The Between-Quarters Test: Finding Gaps in Your Making Tax Digital for Income Tax Routine
Making Tax Digital for Income Tax (MTD for IT) moved from pilot to live obligation in April 2026. For sole traders and landlords within scope — generally those with qualifying income above £50,000 — the practical question is no longer whether to adapt, but whether the routine holds when work gets busy. With the 7 November 2026 quarterly update behind us, the next natural checkpoint is the submission due 7 February 2027.
A readiness review between quarters is more useful than a scramble at the deadline. It tests habits rather than intentions: whether records are captured close to the transaction, whether software access works when needed, and whether money is being set aside for the eventual tax bill. The aim is not a perfect system. It is a routine that can survive a busy month, a holiday and a change of accountant.
What the quarterly cycle actually demands
MTD for IT requires digital records and quarterly updates, followed by an end-of-year final declaration. The quarterly update is a summary of income and expenses, not a full set of accounts and not, in itself, a tax payment. The obligation still depends on keeping adequate digital records and using compatible software to submit returns.
For most businesses, the pattern is straightforward: four quarterly deadlines, one final declaration, and a continuing need to reconcile the digital records with bank statements and invoices. The dates are fixed, but the work behind them is cumulative. A missed expense in one quarter does not disappear; it becomes a correction later.
The main quarterly deadlines are:
| Period covered | Submission deadline |
|---|---|
| 6 April to 5 July | 7 August |
| 6 July to 5 October | 7 November |
| 6 October to 5 January | 7 February |
| 6 January to 5 April | 7 May |
The final declaration is due by 31 January after the tax year ends. These dates should be in the business calendar, not left to memory or to an accountant’s reminder.
Audit the record-keeping habit first
Software does not fix poor records. A useful test is to choose a recent week and trace five transactions from bank statement to digital record to supporting receipt. If any step relies on reconstruction, the routine is fragile.
Look for three practical habits. First, business and personal spending should be clearly separated, preferably through a dedicated bank account or a consistent tagging method. Second, receipts and invoices should be captured digitally at the point of sale or shortly afterwards. Third, expenses should be categorised consistently, not left as a single untagged total until quarter end.
A common weakness is the shoebox approach in digital form: photographs of receipts stored in a phone album with no link to the accounting record. That is not a reliable digital record. The record should show the date, amount, supplier and business purpose, and it should be easy to retrieve during a review.
Test the software and the handoff
Access failures cause avoidable missed deadlines. Confirm that the business, not just the accountant, can log in to the software and export records. Check that the filing authorisation is in place, that the correct tax year is selected, and that a backup or export can be produced without assistance.
Where an accountant or bookkeeper is involved, the handoff should be explicit. Agree cut-off dates for records, the format in which they will be supplied, who reviews categories, who submits the quarterly update and what happens if a login fails. A short written process is better than an informal assumption that someone else is watching the calendar.
If spreadsheets are used, confirm that the bridging software is compatible and that the spreadsheet is structured consistently each quarter. Manual copy-and-paste routines are acceptable only if they are checked. Automation should be tested, not trusted blindly.
Use a red-amber-green checklist
Mark each area honestly. Green means the routine is documented and has been tested. Amber means it works but depends on memory or last-minute effort. Red means there is a material risk of a missed deadline, incomplete record or inaccurate submission.
| Area | Green | Amber | Red |
|---|---|---|---|
| Record capture | Sales and expenses entered weekly with digital evidence | Most records complete, but quarter-end catch-up is normal | Paper or phone-based records with no consistent link to the ledger |
| Software access | Compatible software tested and filing access confirmed | Software in place, but backup or export untested | No compatible software or uncertain login details |
| Accountant handoff | Written scope, authorisation and review dates agreed | Informal arrangement with no calendar | Assumption that the accountant will handle everything without records |
| Deadline calendar | All quarterly dates and final declaration scheduled with reminders | Dates known but no named owner | Reliance on memory or ad hoc reminders |
| Cash reserve | Monthly transfer to a tax pot based on profit forecast | Occasional set-aside when cash allows | No separate funds for tax and National Insurance |
| Reconciliation | Bank and ledger checked before each submission | Occasional checks | Updates submitted from estimates without review |
Any red item should be treated as a priority before the next quarterly update. Three or more amber items suggest the routine is workable but exposed. A clean green sheet is not a guarantee of accuracy, but it shows that the process has been designed rather than improvised.
Put cash aside before the bill arrives
Quarterly updates can create a false sense of security because they are not tax bills. The eventual liability still includes income tax and National Insurance, plus payments on account where applicable. A business that submits on time but has not reserved cash may still face a funding problem.
A simple method is to calculate a provisional tax percentage from the latest profit forecast and transfer that amount monthly to a separate account. Review the percentage after each quarterly update. If profit is rising, increase the transfer; if it falls, adjust rather than stop. The tax pot should be boring and separate, not used for working capital.
A 90-minute review before the next deadline
Block 90 minutes in the calendar. Trace five recent transactions. Confirm software access and filing authorisation. Check the next quarterly date and the final declaration date. Review the tax pot balance against the latest profit estimate. Then list every red and amber item with a named owner and a completion date.
The first year of MTD for IT will expose weak points. The businesses that cope best are not those with the most elaborate systems, but those that review the routine between deadlines and fix small gaps before they become filing problems.
