MTD Quarterly Updates for Builders: What Do You Need to Submit?

If you’re a self-employed builder or tradesperson who has to use Making Tax Digital for Income Tax, one of the biggest changes will be sending quarterly updates to HMRC.

But what actually goes into an MTD quarterly update? Do you need to work out your tax four times a year, send copies of invoices and receipts, or complete four tax returns?

The good news is that quarterly updates are much simpler than that. They are based on the income and expenses recorded in your digital bookkeeping software during the quarter.

In this guide, we explain what builders and tradespeople need to record, what gets sent to HMRC and how keeping your bookkeeping up to date can make quarterly MTD updates straightforward.

What is an MTD quarterly update?

An MTD quarterly update is a summary of the income and expenses recorded in your digital bookkeeping records during the quarter.

Your compatible accounting software uses those records to send the required information to HMRC. You do not normally send HMRC copies of every invoice or receipt as part of the quarterly update.

The update is not a separate tax return, and it does not mean you have to calculate and pay your Income Tax four times a year. Its purpose is to provide HMRC with regular information about your business income and expenses during the tax year.

What income do builders need to include in their MTD records?

If you’re a self-employed builder or tradesperson, you’ll need to keep digital records of your business income. This will normally include payments you receive for labour, materials you recharge to customers and other income from your building or trade business.

If you work as a CIS subcontractor, you should record the gross amount before CIS tax is deducted, as well as keeping a record of the CIS deductions made by contractors.

Keeping your income records up to date throughout the quarter means the figures needed for your MTD quarterly update can be taken directly from your bookkeeping software, rather than having to piece everything together at the last minute.

What expenses do builders include in an MTD quarterly update?

You’ll also need to keep digital records of your business expenses. For builders and tradespeople, these could include materials, tools, work clothing where allowable, van and travel costs, insurance, phone costs and other expenses relating to the business.

You don’t send copies of all your receipts to HMRC with each quarterly update, but you should keep the records and evidence needed to support your expenses.

Using bookkeeping software throughout the year makes this much easier because expenses can be recorded and categorised as they happen, rather than trying to sort through months of receipts when an MTD deadline is approaching.

Do you need to send invoices and receipts to HMRC?

No. Your MTD quarterly update is based on the information held in your digital records. You do not normally upload copies of every invoice, receipt or CIS statement to HMRC with the quarterly update.

However, you still need to keep proper records and supporting evidence for your income and expenses.

The important thing is to keep those records organised throughout the year. For a busy builder or tradesperson, recording transactions regularly is much easier than trying to find missing invoices, receipts and CIS statements months later.

When are MTD quarterly updates due?

Under Making Tax Digital for Income Tax, you’ll send HMRC four quarterly updates during the tax year.

For most people using the standard tax-year quarters, the periods and deadlines are:

6 April to 5 July — due by 7 August6 July to 5 October — due by 7 November6 October to 5 January — due by 7 February6 January to 5 April — due by 7 May

Your bookkeeping software should help you keep track of the information needed for each update. The key is to keep your income and expenses up to date rather than leaving everything until the deadline.

Do quarterly updates mean paying tax four times a year?

No. Sending quarterly updates does not mean you have to pay your Income Tax four times a year.

The quarterly updates give HMRC information about your business income and expenses as the tax year progresses. They are not four separate tax returns or four separate tax bills.

Your overall tax position is dealt with after the end of the tax year, taking into account your income, allowable expenses and, where relevant, any CIS tax that has already been deducted from your payments.

How can FreeAgent help with MTD quarterly updates?

FreeAgent can help keep your bookkeeping records up to date throughout the quarter by bringing transactions in from your business bank account.

Income and expenses can then be categorised as you go, giving you the digital records needed for Making Tax Digital without having to start from scratch every three months.

For builders and tradespeople, this can be particularly useful for keeping track of income, materials, business expenses and CIS deductions in one place.

At MTD Trade Books, we use FreeAgent to help keep clients’ records organised and prepare the information needed for their MTD quarterly updates.

Need help with your MTD quarterly updates?

If you’re a self-employed builder or tradesperson and you’d rather spend your time working than worrying about bookkeeping and MTD deadlines, MTD Trade Books can help.

We specialise in straightforward bookkeeping for builders, tradespeople and CIS subcontractors. Using FreeAgent, we can keep your income and expenses organised, maintain your digital records and deal with your Making Tax Digital quarterly updates.

If you’re already behind with your records or have missed a quarterly update, we can also help you get everything back up to date.

Get in touch with MTD Trade Books to find out how we can help.