This blog explains what quarterly MTD actually means in practice, which sectors are likely to feel it most, and how an accountant-led, Xero-based approach with Total Books Accountants LTD can turn extra reporting into better tax planning and tax savings. It also looks at the role of Total Books as an HMRC-authorised agent for both UK residents and overseas clients with UK-source income.
Key points at a glance
- Quarterly MTD for Income Tax is being phased in. Sole traders and landlords with higher levels of trading or rental income will have to keep digital records and submit quarterly updates, followed by year-end statements, instead of just one annual Self Assessment.
- It’s about “how” and “when”, not new tax rates. The core Income Tax rules don’t suddenly change, but HMRC will get regular data instead of a single yearly snapshot.
- Industries with patchy, seasonal or cash-heavy income will feel it most. Landlords, hospitality, retail, trades, creatives and seasonal businesses will see a big jump in admin if they stay on manual systems.
- Accountants plus Xero can turn MTD into an advantage. With good digital records, quarterly updates become a tool for forecasting, planning and saving tax, not just avoiding penalties.
- Total Books connects MTD directly to tax planning. As an HMRC-authorised agent, we handle quarterly submissions and use live data to improve tax efficiency for UK-based and non-resident clients alike.
What is quarterly MTD for Income Tax – in plain English?
Quarterly MTD for Income Tax (often shortened to MTD ITSA) is the UK government’s plan to move individuals with business and property income onto a digital-first, little-and-often reporting system.
Instead of:
- keeping paper records or spreadsheets, and
- filing one Self Assessment return in January,
you will:
- keep digital records in compatible software, and
- submit quarterly summaries of income and expenses for each business and property source,
- then send year-end statements to finalise the position.
The idea is that HMRC gets more timely, accurate information, and you get a clearer picture of your tax position during the year instead of being surprised after year-end. Learn more about our strategic tax planning & digital disclosure service.
How does MTD change the reporting pattern?
Under quarterly MTD you will have four main moving parts:
- Digital record-keeping
Every business and property transaction is recorded digitally – no more shoebox of receipts, at least not without a scanning app behind it. - Quarterly updates
At least once every three months you send a summary of income and expenses for each self-employment and each property business. - End of Period Statement (EOPS)
After the end of the tax year, you send an EOPS for each trade/property business, where you apply adjustments such as capital allowances and final tax adjustments. - Final Declaration
By the usual 31 January deadline, you submit a single declaration that finalises your overall position – all sources of income, reliefs and allowances. This replaces the traditional Self Assessment tax return.
The tax year and payment dates broadly stay the same. What changes is the frequency and format of what you send.
Who will be affected – and from when?
The move to quarterly MTD is being phased in by income level, and it only applies to specific types of income.
Which income counts?
MTD for Income Tax applies to qualifying income from:
- self-employment (sole trader income), and
- property businesses (UK or overseas property income that is taxable in the UK).
The key point: HMRC looks at your gross income from these sources (before expenses) across all trades and properties you own, per person.
Who’s in scope?
In broad terms, once your combined gross self-employment and property income crosses the relevant threshold, you will be required to:
- maintain digital records, and
- file quarterly updates and year-end statements under MTD.
This is per individual, not per business. So if you have:
- £35,000 from self-employment, and
- £20,000 gross rent from property,
you’d be treated as having £55,000 qualifying income and sit inside MTD.
What about people living outside the UK?
The scope is set by UK tax exposure, not just where you live.
You can fall into quarterly MTD if:
- you are a UK national living abroad with UK rental income, or
- you are non-resident but have a UK trade or UK property portfolio.
In those cases, you may have no UK job, no UK home and still be obliged to run a UK digital record system and send quarterly updates. That’s where having an accountant such as Total Books, based in the UK and authorised with HMRC, becomes important.
What does quarterly MTD actually involve, day to day?
It helps to think of quarterly MTD as three layers: records, submissions and decisions.
1. Digital records – everything starts here
You’ll need a structured way to capture:
- sales, fees, rent and other income
- expenses, from supplies and travel to repairs and subscriptions
- bank transactions and card transactions relating to the business or property
- invoices, bills and receipts in digital form
The easiest route is to put a cloud accounting system at the centre – Xero being our platform of MTD choice – and:
- connect bank feeds so transactions arrive automatically
- connect add-ons like Dext for snapping and forwarding bills and receipts
- set up rules to code common transactions consistently
- keep separate tracking for different businesses or property portfolios
Once that’s in place, digital record-keeping becomes largely a matter of checking and categorising, rather than typing.
2. Quarterly updates – the compliance layer
Each quarter, Xero will hold an up-to-date view (assuming the bookkeeping is done). Your accountant can then:
- review and tidy the data
- produce a summarised profit-and-loss view for each trade/property
- submit the quarterly MTD updates to HMRC as your authorised agent
For you, that means:
- fewer last-minute scrambles
- a clear rhythm: bookkeeping monthly, review and submission quarterly
- a short, plain-language summary of what’s gone in and what it implies for tax so far
3. Year-end statements – tying it all together
At the end of the tax year, the quarterly figures are not thrown away; they are refined:
- adjustments are made for stock, work in progress, accruals, private use and capital allowances
- each trade and property business has its own finalised EOPS
- the Final Declaration gathers all income – including employment, dividends, interest and foreign income – and final personal reliefs (pensions, Gift Aid, etc.)
So, you get the best of both worlds: steady updates through the year, and a proper annual review to optimise your overall position.
Book a Free 15-minute strategy meeting to discuss more about the quarterly MTD submission.
Which UK industries will feel quarterly MTD most?
Some sectors are already digital, using Xero or similar daily. For them, quarterly MTD is just another output. Others currently run on memory, paper and spreadsheets – and they will feel it sharply.
Landlords and property investors
Landlords are right at the front of this change, and many are still geared towards once-a-year record gathering. Common characteristics:
- Rent tracked in spreadsheets or not at all.
- Agent statements saved in email but never properly reconciled.
- Repairs paid from personal accounts.
- No distinction between repairs vs capital improvements in the records.
Quarterly MTD adds:
- a strict timetable for summarising rental income and expenses, and
- the need for clean segregation between different properties and ownerships (solo, joint, company, etc.).
Landlords with multiple properties, or those living abroad, are especially exposed. They need systems that can:
- pull agent statements into Xero
- reconcile mortgage and service charge payments automatically
- keep digital evidence of repairs and maintenance available for tax purposes.
Hospitality, retail and leisure
Cafés, pubs, restaurants, salons, gyms and small shops often:
- take high volumes of small payments
- have a mix of card, cash and online sales
- work long hours with little time for admin
MTD piles more pressure on top of already tight labour and cash conditions unless:
- tills and card systems are integrated into the accounts
- cash takings and tips are handled in a disciplined way
- bank reconciliation happens weekly, not yearly
The risk for these businesses isn’t just penalties. Poor quarterly data can hide:
- shrinking margins
- creeping wage or energy cost increases
- slowly lengthening supplier repayment times
Handled well, the quarterly cycle becomes a financial “pulse check”.
Trades and construction
Builders, electricians, plumbers, roofers and other tradespeople often have:
- project-based work with uneven income
- big materials bills and deposits
- CIS tax deductions clawing at cash flow
- fuel and vehicle costs that fluctuate heavily with work patterns
Quarterly MTD highlights any weaknesses in:
- separating business and personal spending
- tracking which jobs are actually profitable
- managing materials and retentions against progress
Shifting these businesses onto Xero, with bank feeds and digital receipts, turns a messy paper trail into usable data – both for MTD and for pricing and quote decisions.
Creative freelancers and professional contractors
Designers, developers, marketers, media freelancers and consultants may operate with:
- multiple clients across different industries and countries
- irregular project starts and finishes
- a blend of self-employment, contracting through a company and sometimes employment
Quarterly MTD means:
- more rigid deadlines even when work is feast-or-famine
- the need to allocate income and costs accurately to each self-employed trade
- extra care with foreign currency and overseas expenses
The upside is that freelancers can see quickly which clients, services and projects deliver the best return after tax, prompting smarter decisions about where to focus.
Farms and seasonal businesses
Agriculture and seasonal tourism operations have:
- high spending in some quarters (planting, stock, preparation)
- revenue concentrated in others (harvest, holiday seasons)
Quarterly figures can look alarming when taken in isolation. Without context, HMRC sees only the numbers. With good accounting and explanation, quarterly data simply documents the seasonality instead of raising red flags.
How does the accountant’s role change under quarterly MTD?
MTD doesn’t remove the need for an accountant; if anything, it makes the relationship more continuous.
From “once-a-year fix” to “quarterly partner”
Historically, many business owners and landlords:
- brought a pile of records to their accountant once a year
- had the return done and signed
- maybe had a brief chat on tax planning
Under quarterly MTD, a good accountant will:
- help choose and set up Xero (and any add-ons)
- design a simple day-to-day process for you or your staff
- check and tidy the data before each quarterly submission
- turn quarterly numbers into practical recommendations on tax and cash-flow
This means your tax position is reviewed several times a year, not just once.
How does Total Books build MTD into its services?
For MTD clients, Total Books typically:
- Migrates or sets up Xero as the main accounting hub.
- Connects bank feeds, card feeds and, where relevant, letting agents and ecommerce/POS tools.
- Implements a simple rule-based coding structure so transactions drop into the right categories.
- Uses Dext or similar for digital receipts, giving you a clear system: snap, forward, forget.
- Provides or supports regular bookkeeping to keep everything current.
- Reviews and submits quarterly updates as an HMRC-authorised agent.
- Sits down (often via Zoom or Teams) to explain what the numbers show and what actions make sense.
That combination of tech, process and advice is what turns MTD from a headache into a working management system.
How does quarterly MTD create tax planning and tax saving opportunities?
Quarterly submissions aren’t just for HMRC’s benefit; they give you a constantly updated tax picture. That’s powerful if used properly.
Smoother management of payments on account
Payments on account are based on your last tax bill. If your profits drop, you can end up overpaying and waiting months for refunds. If they rise, you can face nasty surprises.
With quarterly figures, Total Books can:
- project your full-year profit and tax several times a year
- adjust payments on account where there’s a clear case
- warn you early if tax is trending higher than expected
That means fewer shocks and better cash control.
Better timing of capital spending and repairs
With real-time data, you can plan:
- when to buy equipment, vehicles, tools or IT kit
- when to carry out large property repairs or improvements
- how to split spending across tax years for best effect
For landlords, quarterly views of property income and expenses help distinguish between:
- routine repairs that reduce this year’s profit, and
- improvements that increase the asset’s value and influence future capital gains.
Having clear digital evidence supports the tax treatment if HMRC asks.
Structural decisions: sole trader, company, or something else?
Regular numbers make it easier to see when the business has “outgrown” its current structure. Quarterly MTD can flag that:
- a profitable sole trade might now be better run through a limited company
- a landlord portfolio is at the stage where a company or family investment structure is worth considering
- certain lines of work are consistently unprofitable and should be reshaped or dropped
Total Books can model the tax impact of different structures using live data rather than guesswork.
Cross-border and non-resident tax mitigation
For UK nationals living overseas, or foreign nationals with UK income, quarterly MTD helps by:
- providing clean, consistent figures for UK tax
- making it easier to align with foreign tax years and rules
- supporting claims under double taxation agreements where appropriate
A properly run MTD system means your UK tax picture is clear and defensible, reducing the risk of overpaying or being penalised in more than one country. Learn about our foreign tax consultancy process.
What extra challenges do overseas clients face – and how does Total Books help?
If you live abroad, MTD can feel like a UK admin burden that’s awkward to manage from another time zone.
Typical issues include:
- UK rent or business income paid into foreign bank accounts.
- No UK post for HMRC letters.
- Being unsure which parts of your income are taxable in the UK vs overseas.
- Clashing tax years and filing calendars.
Total Books helps by:
- setting up Xero with a UK focus, including UK bank feeds where appropriate
- becoming the point of contact with HMRC as your authorised tax agent
- managing quarterly submissions, year-end statements and Final Declarations
- providing annual summaries that your local adviser can use in your country of residence
- discussing wider planning, such as future capital gains on UK property or eventual return to the UK, to minimise long-term tax exposure
You deal with one consistent UK team, via secure digital channels, instead of trying to piece everything together solo.
What happens if you ignore quarterly MTD or get it wrong?
Once you’re within scope, treating MTD as optional is risky.
The immediate risks
If quarterly updates or year-end statements are:
- filed late, or
- not filed at all, or
- obviously inconsistent with past patterns,
you risk:
- late submission penalties and interest on late payment
- additional questions and checks from HMRC
- more intensive compliance attention in future years
On top of that, poor digital records do you no favours if:
- you want to borrow or refinance
- you’re looking to sell the business
- you’re planning to gift or transfer assets within your family
The hidden cost: missed planning opportunities
If MTD is treated as a tick-box exercise:
- you won’t see useful trends in profit, margin, costs or tax
- you’ll continue to make big decisions without current numbers
- reliefs and allowances may be underused, simply because no one is watching the data throughout the year
Using MTD properly means getting value back for the extra reporting you’re doing.
How Total Books weaves MTD into broader tax planning
For Total Books, quarterly MTD isn’t a standalone product – it fits into wider services:
- Tax planning and advisory
- using quarterly numbers to time income, expenditure and capital investment
- reviewing payments on account and avoiding nasty surprises
- planning around future Capital Gains Tax and, where relevant, Inheritance Tax
- using quarterly numbers to time income, expenditure and capital investment
- Landlord and property tax
- aligning MTD records with property tax rules, mortgage changes and long-term portfolio strategy
- aligning MTD records with property tax rules, mortgage changes and long-term portfolio strategy
- Virtual finance services
- for growing businesses, adding regular management accounts, cash flow forecasting and board-style reporting on top of MTD compliance
- for growing businesses, adding regular management accounts, cash flow forecasting and board-style reporting on top of MTD compliance
- Non-resident and expat tax
- making sure UK MTD obligations are met while dovetailing with overseas tax systems
- making sure UK MTD obligations are met while dovetailing with overseas tax systems
The idea is simple: if you have to produce the data for HMRC anyway, it should work hard for you too.
Quick FAQs on quarterly MTD and your accountant
Will quarterly MTD increase my tax bill?
MTD itself doesn’t change tax rates or bands, but:
- it can reduce the opportunity to “forget” income, and
- it gives HMRC more information.
Handled badly, that might feel like more tax. Handled well, with planning built around live data, the extra visibility can reduce long-term tax and penalties.
Can I stay on spreadsheets and bridge into MTD?
For some taxes that has been possible, but for quarterly Income Tax reporting you need a very robust setup to make spreadsheets work. For most landlords and small businesses, running MTD through Xero or similar is more reliable, more efficient and much easier to support as your affairs grow.
Do I really need an accountant for MTD?
In theory, no. In practice, most people in scope:
- have more valuable uses for their time, and
- gain more in tax savings and peace of mind than they spend on professional support.
An accountant can handle the technical side and the planning side, letting you focus on running the business or managing investments.
I live abroad – can you deal with HMRC entirely on my behalf?
Yes. As an HMRC-authorised tax agent, Total Books can:
- set up your MTD registration
- obtain the necessary authorisations
- maintain digital records in Xero
- submit all quarterly and year-end reports
- correspond with HMRC about your UK tax affairs
You still approve the key decisions and filings, but you don’t have to wrestle with the mechanics.
Next step – turn MTD into a tool, not a threat
Quarterly MTD for Income Tax is coming. If you:
- are close to or above the qualifying income thresholds,
- own rental property, especially more than one,
- work in hospitality, retail, trades, the creative sector or a seasonal business, or
- live abroad but still have UK income,
this is the right time to get ahead of the change.
Total Books Accountants LTD can:
- review when MTD will apply to you,
- set up and optimise your Xero-based digital record system,
- manage quarterly updates and year-end submissions as your HMRC agent, and
- build ongoing tax planning around the live data you’re already required to provide.
From here you can move naturally into our related services – MTD and digital records, tax planning, landlord and property tax, non-resident and expat tax – or arrange a discovery call to talk through your situation and design an MTD-ready, tax-efficient plan around you.
