Cigma Accounting: What We Learned from the First MTD Income Tax Quarterly Update 

Making Tax Digital is changing the way businesses and individuals manage their tax records and report to HMRC. For many, the biggest challenge is not the quarterly submission itself, but getting the right systems, digital records and processes in place. 

At Cigma Accounting, we specialise in providing MTD services for businesses and individuals across London and the UK, including self-employed individuals, landlords and VAT-registered businesses. We help clients understand their MTD obligations, set up the right digital processes and stay on top of their ongoing reporting requirements. 

We are also an official Zoho Books MTD Income Tax Certified Partner, supporting businesses with digital bookkeeping and the software processes needed for MTD compliance. 

Our practical experience with the first MTD for Income Tax quarterly update has highlighted several important lessons. The first quarterly submission itself was not necessarily the most challenging part. The greater work was helping businesses understand the change, adapt from an annual bookkeeping mindset to a quarterly one, establish reliable digital records and become comfortable with the software and processes involved. 

Our experience has also been recognised by AccountingWEB, where Cigma Accounting shared practical lessons from supporting businesses through the first MTD for Income Tax quarterly update. 

Read the full AccountingWEB article: First MTD IT quarterly update: lessons for practice firms. 

This article looks beyond the technical requirement to focus on the practical lessons we believe businesses should take from the first quarterly reporting cycle. 

What We Learned from the First MTD Income Tax Quarterly Update

1.The biggest change is moving from an annual to a quarterly mindset

One of the clearest lessons from the first quarterly update was that MTD for Income Tax is not simply a new way of submitting an existing annual tax return. 

Businesses that have traditionally organised their records once a year need to move towards keeping their records consistently throughout the year. 

That change in behaviour can be more challenging than the software itself. 

Under a quarterly reporting system, leaving bookkeeping until the end of the year can create unnecessary pressure. Businesses need to maintain their records regularly so that the information is ready when each quarterly update is due.

Worried that late or inaccurate quarterly updates could lead to penalties? Read our guide to higher penalties for MTD filers.

2.Getting the digital record-keeping setup right early makes a significant difference

Another important lesson was the value of establishing the bookkeeping process correctly from the beginning of the tax year. 

Where digital records are maintained consistently, preparing the quarterly update becomes much more straightforward. 

For businesses using cloud accounting software, connected bank feeds can help keep records current, while consistent categorisation of income and expenses reduces the amount of work required at quarter end. 

AI-enabled bookkeeping can also help businesses organise transactions and maintain more consistent digital records throughout each reporting period.

The aim should be to make the quarterly submission the result of good ongoing bookkeeping, rather than a separate exercise carried out just before the deadline.

Businesses adapting to quarterly MTD reporting may benefit from professional digital bookkeeping services in Farringdon to keep records, transactions and supporting information up to date throughout each reporting period.

Want to keep your records organised from the start? Read our guide to record-keeping for self-employed individuals.

3.Software is only part of the solution

Having MTD-compatible accounting software is important, but simply choosing software does not make a business MTD-ready. 

Businesses also need to understand how to use the software effectively and how their day-to-day bookkeeping processes fit into the quarterly reporting cycle. 

Our experience showed that some businesses needed more practical support becoming comfortable with new software and processes than they initially expected. 

This is why MTD preparation should consider both technology and the people using it. 

Not sure which MTD-compatible software to use? Read our guide to choosing the right software for Making Tax Digital.

4.Businesses should not leave preparation until the quarterly deadline

Another lesson was the importance of starting conversations and checks well before the quarter closes. 

Businesses should have time to identify missing records, resolve bookkeeping issues, become familiar with their software and deal with any administrative requirements before the reporting deadline arrives. 

A last-minute approach can turn relatively simple issues into deadline pressures. 

For future quarterly updates, we believe businesses should review their records during the quarter rather than waiting until the submission period to identify problems.

Want to avoid last-minute pressure? Read our guide to why filing early makes sense.

5.Quarterly updates are not the same as paying tax four times a year

One of the practical misunderstandings we encountered was the assumption that a quarterly update is effectively a quarterly tax return. 

It is not. 

The quarterly update provides HMRC with information about income and expenses during the relevant period. It should not be confused with the final tax calculation and declaration. 

Understanding this distinction can help businesses approach MTD as an ongoing record-keeping and reporting requirement, rather than four separate tax payment deadlines.

Want to understand your MTD obligations? Read our guide to preparing for Making Tax Digital compliance.

6.Businesses with different income sources need to understand how reporting works

Another important consideration is that businesses or individuals with more than one qualifying source of income need to understand how those sources are reported under MTD. 

For example, trade and property income may need to be treated separately for quarterly reporting purposes. 

This makes it particularly important to understand the reporting requirements before the first quarterly deadline rather than assuming the process will simply mirror the annual Self Assessment return.

Did you know you may be able to earn some property income tax-free? Read our guide to the property allowance for landlords. 

How Zoho Books Can Support MTD for Income Tax 

As an official Zoho Books MTD Income Tax Certified Partner, Cigma Accounting uses Zoho Books as part of its digital accounting approach. 

Businesses looking for a Zoho accountant Fulham can work with Cigma Accounting to understand how Zoho Books supports digital record keeping and MTD Income Tax reporting.

The practical lesson from the first quarterly update is that accounting software works best when it becomes part of the normal bookkeeping routine. 

Digital records, bank feeds and consistent transaction categorisation can help businesses keep their financial information current throughout the year. This can make the quarterly reporting process more efficient because the underlying records are already maintained rather than reconstructed at quarter end. 

However, software should support a good bookkeeping process rather than replace it. 

The right setup depends on the business, its income sources, the way it records transactions and the level of support required. 

What Should Businesses Do Before Their Next MTD Quarterly Update? 

Based on the lessons from the first reporting cycle, businesses should consider: 

• Keeping digital records up to date throughout the quarter. 

• Reviewing the categorisation of income and expenses regularly. 

• Using accounting software consistently rather than treating it as a year-end tool. 

• Checking that bank feeds and other integrations are working correctly where applicable. 

• Allowing time to resolve bookkeeping issues before the quarter closes. 

• Making sure they understand their quarterly reporting obligations. 

• Speaking to their accountant early if they are unsure about the process. 

The objective should be simple: 

Keep the records current throughout the quarter so the quarterly update is a straightforward reporting exercise.

Want to know when is next MTD quarterly come? Read our guide to MTD reporting deadlines and key dates. 

The Bigger Lesson from the First Quarterly Update 

The first MTD for Income Tax quarterly update has demonstrated that successful MTD preparation is about more than choosing accounting software or submitting information to HMRC. 

It requires a change in the way businesses approach their records. 

The most effective approach is to combine: 

Accurate bookkeeping + appropriate digital software + consistent record keeping + early preparation 

When these elements are in place, quarterly reporting becomes much more manageable. 

At Cigma Accounting, our experience has reinforced the importance of helping businesses establish these processes early, rather than waiting until a quarterly deadline is approaching. 

Our digital accounting Fulham support also helps local businesses develop consistent bookkeeping routines and prepare for ongoing MTD reporting requirements.

With MTD for Income Tax continuing to develop, businesses that build good digital bookkeeping habits now will be better positioned for future quarterly reporting requirements. 

CASE STUDY: First MTD Income Tax Quarterly Update and the Importance of Digital Bookkeeping

David, a self-employed consultant, visited our Fulham office after struggling to prepare his first MTD for Income Tax quarterly update. Although he had started using digital accounting software, he was still collecting receipts and updating his business expenses at the end of each reporting period.

During our review, we found that several transactions had not been categorised correctly, while some business expenses were missing from his digital records. David had assumed that installing MTD-compatible software was enough to meet his reporting obligations.

We explained that Making Tax Digital for Income Tax requires more than software. Consistent digital record keeping, accurate bookkeeping and regular transaction reviews are essential for preparing reliable quarterly updates.

As part of the discussion, we reviewed how connected bank feeds and transaction categorisation could support his bookkeeping routine. We also explained that quarterly updates report income and expenses to HMRC and do not mean paying Income Tax four times a year.

Because David also received rental income, we discussed why his self-employment and property income needed to be considered separately for MTD reporting purposes.

David introduced a monthly bookkeeping review rather than waiting until the quarterly deadline. During his visit, we also discussed how cloud bookkeeping Fulham businesses use can support regular transaction reviews and more consistent MTD record keeping.He left with a clearer understanding that successful MTD Income Tax compliance depends on maintaining accurate records throughout the year, not simply completing a submission before the deadline.