The MTD Cycle in Plain English
Making Tax Digital for Income Tax changes how you report your property income to HMRC. Instead of one annual tax return, you now work through a four-stage cycle each tax year.
This article explains what happens at each stage and how the cycle repeats year after year.
The four stages of MTD compliance
Each tax year follows the same pattern:
- Record your income and expenses digitally — ongoing throughout the year
- Send quarterly updates — four times per year
- Final declaration — once at year-end
- Pay your tax bill — in line with Self Assessment payment dates
Stage 1: Record your income and expenses digitally
From the start of the tax year, you must keep digital records of all your rental income and expenses using MTD-compatible software like Provestor.
This means recording rent received, agent fees, repairs, mortgage interest, and other property expenses as they happen throughout the year. At this stage you're just keeping records—no tax calculations needed yet.
See Digital record-keeping for what records you must keep.
Stage 2: Send quarterly updates
Four times per year, your software sends HMRC a summary of your income and expenses. These are called quarterly updates.
Each update includes:
- Total rental income received
- Total expenses by category (repairs, agent fees, insurance, etc.)
- Mortgage interest and finance costs reported separately
Quarterly updates are cumulative—each one reports your totals from the start of the tax year (6 April) up to that point:
| Quarter | Period covered | Deadline |
|---|---|---|
| Q1 | 6 April to 5 July | 7 August |
| Q2 | 6 April to 5 October | 7 November |
| Q3 | 6 April to 5 January | 7 February |
| Q4 | 6 April to 5 April | 7 May |
Because updates are cumulative, if you find an error you just correct your digital record and the next update will reflect the change automatically. Your software prepares the summary, you review it, and it sends to HMRC when you confirm.
See Sending quarterly updates for a step-by-step guide.
Stage 3: Final declaration at year-end
Once you've sent all four quarterly updates, you complete your final declaration—the MTD equivalent of your Self Assessment tax return.
This includes your full year's income and expenses, any adjustments or reliefs, other income sources (dividends, employment income), and your final tax calculation.
Deadline: 31 January following the end of the tax year. You can submit earlier, but the payment date stays the same.
See Submitting your final declaration for step-by-step guidance.
Stage 4: Pay your tax bill
MTD doesn't change when or how you pay tax. Payment dates remain the same as Self Assessment:
| Payment | Due date | What it covers |
|---|---|---|
| Balancing payment | 31 January | Any tax still owed for the previous tax year |
| First payment on account | 31 January | Advance payment towards the current tax year |
| Second payment on account | 31 July | Second advance payment towards the current tax year |
See Payments on account explained and How to pay HMRC for details.
How the cycle repeats each tax year
The cycle starts again on 6 April each year. Your digital records stay in the software, quarterly deadlines reset for the new year, and income/expense totals start from zero. The four stages remain the same.
Your first year of MTD
If you sign up mid-year, your first quarterly update covers from 6 April to the end of the current quarter—you'll need to enter all transactions from 6 April onwards before your first submission.
See HMRC's guidance on signing up for more on joining MTD.
What next?
Now that you understand the MTD cycle, you might find these articles helpful:
- MTD deadlines and key dates — all the important dates in one place
- Digital record-keeping — what records you must keep and how
- Preparing your quarterly update — step-by-step guide to getting ready for your first submission
- Understanding your tax bill — how HMRC calculates what you owe