MTD for Income Tax replaces the single annual Self-Assessment return with four quarterly updates during the year and one year-end Final Declaration. An earlier version of the rules also included a separate End of Period Statement (EOPS) for each income source, but that step was removed before the April 2026 go-live. There are now two things to understand: the quarterly updates, which are operational data, and the Final Declaration, which is the year-end true-up that crystallises the tax.
This piece walks the quarterly update mechanics, what the Final Declaration now absorbs, the deadlines, and the penalty regime. Sister pieces in the MTD owner-managed SME hub cover the threshold eligibility test and the best MTD software choices.
What happened to the End of Period Statement
If you have read older MTD guidance, you may have seen a separate End of Period Statement described as a per-source year-end filing. HMRC dropped the EOPS as a standalone step before MTD ITSA went live. The year-end adjustments it would have carried, such as accruals, capital allowances, reliefs and prior-year corrections, are now made when you finalise each business source as part of the Final Declaration. The practical effect is one fewer filing type, not less year-end work.
The filings at a glance
How quarterly updates work
A quarterly update submits cumulative-to-date totals for income and the broad expense categories (cost of sales, repairs, motor, premises, admin, other) per business. HMRC receives totals only, not transaction-level data. The underlying transactions must sit in MTD-compatible software with digital links from source data (bank feeds, sales invoices, receipt capture), but only the totals cross to HMRC via the API.
Quarterly updates do not generate a tax liability. The taxpayer does not pay tax on the basis of a quarterly figure; it is operational data. Tax is only crystallised at the Final Declaration in the January following the tax year. The quarterly cadence is about visibility and discipline, not collection.
What goes in a quarterly update
- Income: gross sales or fees for the period.
- Cost of sales: materials, stock movements, direct costs.
- Repairs and maintenance.
- Motor and travel expenses.
- Premises (rent, rates, insurance).
- Administrative expenses (office, professional fees, accountancy).
- Other expenses (interest, depreciation, bad debts).
- For property income, equivalent categories: rents received, mortgage interest, repairs, agent fees, other allowable.
The Final Declaration: the year-end true-up
The Final Declaration is where the year crystallises. For each business source you finalise the figures, adding the items the quarterly updates do not carry: accruals (income earned but not received, expenses incurred but not paid), opening and closing stock adjustments, capital allowances, prior-year adjustments, and any one-off items. You then layer in income that sits outside MTD (dividends, PAYE employment, savings interest, capital gains), apply allowances and reliefs, and arrive at the personal tax calculation.
The Final Declaration is filed by 31 January following the tax year, the same deadline as the old SA100, and it is the legally binding return HMRC assesses against. In substance it now does the job the old supplementary pages (SA103 for sole traders, SA105 for property) and the once-planned EOPS would have done, in a single finalisation step.
Capital allowances
Capital allowances (Annual Investment Allowance, writing-down allowances, full expensing) are claimed at finalisation, not in the quarterly updates. The quarterly updates show capital expenditure within the period totals, but the calculation that turns expenditure into tax relief happens at the Final Declaration. Most software handles this automatically once asset details are entered.
Mid-year errors and corrections
An error in a quarterly update (wrong categorisation, missed transaction, incorrect amount) is corrected in a later quarterly update or at finalisation, because the updates are cumulative. There is no separate amend-Q1 mechanism after Q2; the correction flows through the next filing. Material year-end adjustments are made as part of the Final Declaration.
Penalty points for missed filings
MTD ITSA uses points-based penalties for late filing. Each missed quarterly update earns one point, and four points in a rolling 12-month period triggers a £200 penalty, with a further £200 for each subsequent miss while at the threshold. The Final Declaration follows a late-filing penalty structure broadly similar to the old Self-Assessment regime, and late-payment interest applies to any tax unpaid after 31 January.
Operational rhythm for an owner-managed SME
- Day-to-day: capture transactions via bank feed and receipt-capture app.
- Weekly or fortnightly: reconcile bank feeds in the accounting software.
- Month-end: review the management figures and flag anomalies.
- Quarter-end (within about five weeks): reconcile, review categorisation, submit the quarterly update.
- Year-end: prepare accruals, adjustments and capital allowances for finalisation.
- 31 January following: file the Final Declaration and pay the tax.
Can my accountant submit on my behalf?
Yes, under the new MTD agent authorisation. The accountant typically handles the quarterly updates and the Final Declaration, with the business owner reviewing and approving. The MTD agent authorisation is a different flow from the legacy 64-8, takes a week or so to set up the first time, and should be in place before the first quarterly deadline.
What if I have multiple businesses?
A sole trader running two distinct trades has two income sources for MTD, with separate quarterly updates for each, finalised together at the Final Declaration. Most software supports this through trading-entity tagging within one accounting file. Where the trades are genuinely separate (different VAT registrations, different customer bases), separate accounting files may be cleaner.