Making Tax Digital · Sole traders
How outstanding quarterly work affects your MTD annual return
ONLY£15A MONTHQuarterly reporting and the annual return are connected stages of MTD.
Quarterly reporting and the annual return are connected stages of MTD. Outstanding business records and updates need to be dealt with before completing the relevant annual return. That connection should be explained accurately, without claiming that every missed update creates the same immediate technical block.
Understand the annual sequence
HMRC requires quarterly reporting before the annual-return process is completed. The final quarterly update provides the year-to-date business figures that feed into subsequent adjustments and the annual calculation. HMRC explains the annual-return process.
If earlier reporting was missed, use the software's supported catch-up process and verify the obligations and cumulative totals. The exact technical response depends on the stage and system. Avoid assuming that a single warning describes every user's situation.
Use the correct January deadline
For a person entering mandatory MTD in 2026/27, that year's annual return is normally due by 31 January 2028. The 2025/26 return due online by 31 January 2027 is a different year's obligation.
Letting work accumulate can still create a practical annual bottleneck. Missing evidence and unresolved categories become harder to reconstruct with time, even where there is no immediate first-year quarterly penalty.
Worked example: preparing the annual stage
A landlord reaches year end with incomplete property records and an outstanding quarterly obligation. Before the annual calculation, the landlord recovers the missing statements, corrects the records and completes the supported reporting steps.
The work concerns the 2026/27 return due in January 2028. It should not be described as an automatic block on the separate January 2027 filing for 2025/26.
Where this fits into Making Tax Digital
For 2026/27, the first mandatory phase generally covers individuals whose combined qualifying self-employment and property income was more than £50,000 in 2024/25, subject to exemptions. Qualifying income normally means income before expenses. It is a different figure from taxable profit. Check the qualifying-income rules.
Once within MTD, keep the required digital records and send quarterly summaries for each relevant business. The summaries are cumulative from the start of the reporting year. They do not contain your entire personal tax position, and sending one does not itself create a quarterly tax-payment demand.
HMRC does not require accounting or tax adjustments before each quarterly update. Those adjustments and the other information needed for the annual return still have to be completed at the appropriate stage. Keep a review list so a matter deferred until year end is not forgotten. Read HMRC's quarterly-update guidance.
Software can organise the information, but the business facts remain essential. Review the figures you approve rather than assuming that a successful import has also settled every tax question.
Understand the first-year concession
HMRC states that there are no penalties for missing quarterly-update deadlines for the 2026/27 tax year. That concession does not remove the digital-record or quarterly-reporting obligations, and it does not make all tax returns and payments penalty-free. Read the precise penalty guidance.
Outstanding quarterly reporting must be dealt with before completing the relevant annual return. However, a missed August 2026 update should not be described as an automatic penalty on the separate 2025/26 return due in January 2027. The 2026/27 annual-return deadline is January 2028.
After the first-year concession, the points rules apply to missed quarterly deadlines as described by HMRC. Do not assume that multiple businesses create multiple points at the same deadline. Annual-return rules, late-payment penalties and interest require their own checks.
If you have fallen behind, establish what is outstanding and work through the supported catch-up process. Keep evidence of technical problems and contact the appropriate support team with the business, period and error details. The useful next step is a complete record and an accepted update, rather than guessing what a generic warning might mean.
A review that checks more than the total
Start with coverage: the correct person, business and period, plus all relevant accounts and cash records. Then look at completeness. A feed can be connected today while still missing an earlier week. Confirm the earliest and latest transactions against the source.
Next, inspect unusual items. Large transfers, loan receipts, refunds, net settlements and private purchases often need more context than a bank description provides. Check for duplicate imports where a statement overlaps a live feed. An automatic warning is useful evidence to investigate, not proof that the entry must be removed.
Finally, review category totals. A category unexpectedly showing zero, a large increase or a negative amount deserves an explanation. You do not have to make every annual tax adjustment at this stage, but you should understand the records behind the summary you approve.
HMRC explains what quarterly updates contain. Keep the approved version and the resulting acknowledgement together. If something later changes, correct the source record and use the software's supported update process so you can explain which figures are current.
Clear the backlog before annual review
Check each business, reporting period and accepted outcome. Retain a list of annual adjustments, other income and reliefs still to review. Treat quarterly completion as a foundation for the annual return, rather than a substitute for the personal tax information required at year end.
Take the next step
Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.