No. Making Tax Digital for Income Tax does not change your payments on account. Quarterly updates are a reporting duty only, no tax is paid with them. You still pay two payments on account by 31 January and 31 July, each usually half of last year's tax bill, with a balancing payment the following 31 January.
That is the short answer, and it is the one that matters most now that MTD for Income Tax (MTD ITSA) went live on 6 April 2026 and the first quarterly update falls due on 7 August 2026. Thousands of sole traders and landlords are worried that filing four times a year means paying four times a year. It does not. Below we separate the two tracks, reporting and paying, show the full 2026/27 calendar side by side, and work through the numbers so you can budget with confidence.
Do MTD quarterly updates change when you pay your tax?
They do not. A quarterly update is a submission of your year-to-date income and expenses through compatible software. It moves no money. Your tax is still settled the way it always has been under Self Assessment: through payments on account on 31 January and 31 July, and a balancing payment on the following 31 January.
The reason for the confusion is understandable. MTD adds new dates to your calendar (7 August, 7 November, 7 February, 7 May), and it feels natural to assume a new filing date is also a new paying date. Under MTD ITSA the reporting cycle and the payment cycle are two separate tracks that run in parallel and never merge. Keeping them separate in your head is the single most useful thing you can do this year.
What is the difference between a quarterly update and a payment on account?
The cleanest way to see it is side by side. One is a report, the other is a payment.
| Feature | Quarterly update | Payment on account |
|---|---|---|
| What it is | A cumulative summary of your income and expenses, year to date, sent via compatible software | An advance instalment toward this year's tax bill |
| How often | Four times a year | Twice a year |
| Deadline | 7 Aug, 7 Nov, 7 Feb, 7 May | 31 January and 31 July |
| Is any money due? | No | Yes |
| What it covers | Totals only, no accounting adjustments or reliefs at this stage | Income tax and Class 4 National Insurance |
Notice that the deadlines never coincide. A quarterly update is never due on 31 January or 31 July, and a payment on account is never due on 7 August or 7 November. That alone tells you the two obligations are genuinely separate.
What does the 2026/27 MTD ITSA calendar actually look like?
Here is the full year for a sole trader, with the reporting track on the left and the payment track on the right. Read down each column and you will see they interleave without ever landing on the same day.
| Date | Reporting obligation (no money) | Payment obligation (money due) |
|---|---|---|
| 7 Aug 2026 | Q1 update (6 Apr to 5 Jul) | - |
| 7 Nov 2026 | Q2 update (6 Jul to 5 Oct) | - |
| 31 Jan 2027 | - | First payment on account for 2026/27 |
| 7 Feb 2027 | Q3 update (6 Oct to 5 Jan) | - |
| 7 May 2027 | Q4 update (6 Jan to 5 Apr) | - |
| 31 Jul 2027 | - | Second payment on account for 2026/27 |
| 31 Jan 2028 | Final Declaration for 2026/27 | Balancing payment for 2026/27 |
The Final Declaration is the one point where reporting and paying meet. It replaces the Self Assessment tax return, pulls together your quarterly figures with your accounting adjustments and reliefs, and confirms the balancing payment. Everything before it is either report-only or pay-only. For a landlord version of this timeline, see our MTD Income Tax deadlines 2026 for landlords.
How do payments on account work?
Payments on account are HMRC's way of collecting tax in advance so you are not hit with a full year's bill in one go. If you owe them, they are due in two instalments, on 31 January and 31 July.
Each instalment is usually half of the tax you owed for the previous year. So the total of your two payments on account equals last year's bill. They cover income tax and Class 4 National Insurance. They do not cover Class 2 National Insurance, student loan repayments or capital gains tax, which are handled separately at the Final Declaration or balancing stage.
What is the balancing payment?
If your actual bill for the year turns out higher than the two payments on account you made, the shortfall is the balancing payment, due by 31 January the following year. If your bill turns out lower, you have overpaid and HMRC refunds the difference or offsets it. Our guide on why your first tax bill feels so high explains why the first year of payments on account can sting.
Who has to make payments on account, and who does not?
You are not always required to make them. HMRC does not ask for payments on account if either of these applies:
- Your tax bill for the previous year was under £1,000, or
- More than 80% of the tax you owed was already collected at source, for example through PAYE on a salary.
If neither exemption applies and last year's bill was £1,000 or more, you will be asked for payments on account. MTD ITSA does not change any of these rules. The thresholds, the exemptions and the timing all carry over from Self Assessment unchanged.
Is the estimated tax figure in my software a bill I have to pay?
No. This is the part that trips people up most. After you file a quarterly update, HMRC and your compatible software show a running estimated tax figure that builds through the year as more of your income is reported. It is there to help you plan and to give you an early sense of your liability.
It is only an estimate. It does not include your accounting adjustments, reliefs or allowances, it is not a demand, and it does not create a new payment date. You do not pay against it. Treat it as a helpful running total, not an invoice. The actual amounts you owe remain fixed to 31 January and 31 July, exactly as before.
Worked example: how the two tracks run in parallel
Meet Priya, a self-employed sole trader. Her 2025/26 Self Assessment bill (income tax plus Class 4 National Insurance) came to £5,000. Because that is over £1,000 and most of it was not collected at source, she owes payments on account toward 2026/27.
Priya's payment track
- First payment on account: £2,500 (half of £5,000), due 31 January 2027.
- Second payment on account: £2,500, due 31 July 2027.
- Balancing payment: any shortfall once her 2026/27 figures are final, due 31 January 2028.
Priya's reporting track
- Q1 update by 7 August 2026, Q2 by 7 November 2026, Q3 by 7 February 2027, Q4 by 7 May 2027. Each moves no money.
- Final Declaration by 31 January 2028, which replaces her Self Assessment return and confirms any balancing payment.
Look closely at July 2027. Priya's second payment on account of £2,500 lands on 31 July 2027, entirely independent of her quarterly-update cadence. Her nearest updates are Q4 on 7 May 2027 and, into the next year, the Final Declaration on 31 January 2028. The £2,500 is due on 31 July whether or not an update happens to be nearby. The two tracks simply do not talk to each other. You can sanity-check your own numbers with our self-employed tax calculator.
Does the 31 July payment on account move because of MTD?
No. The 31 July payment on account is unchanged. MTD ITSA introduces quarterly reporting, but it does not touch the Self Assessment payment calendar. Your 31 January and 31 July dates are exactly where they have always been. If you were expecting a July payment before MTD, you should still expect it now, for the same amount and on the same day.
How do I budget for payments on account when I report quarterly?
Quarterly reporting can actually make budgeting easier, if you use it properly. Because you are keeping digital records and totting up income and expenses every quarter, you have a much clearer picture of your profit as the year goes on. Use that visibility to set money aside.
- Open a separate tax pot. Move a fixed percentage of each payment you receive into it, so the cash is ring-fenced before you spend it.
- Anchor to last year's bill. Your two payments on account total roughly last year's tax. Divide that figure across the months to January and July and save at that pace.
- Watch the running estimate, do not pay it. If your quarterly figures show profits climbing well above last year, expect a bigger balancing payment next January and save extra now.
- Diarise 31 January and 31 July first. Put the payment dates in before the reporting dates, so a busy filing week never crowds out a payment.
If juggling both tracks feels like a lot, that is exactly what an accountant is for. Our accounting service for sole traders keeps your digital records, files your updates and flags your payments before they fall due.
What happens if I miss a deadline: reporting versus payment penalties?
This is where the softer first-year rules can lull you into a costly mistake. The reporting and payment tracks are penalised differently.
Missed quarterly update
For the 2026/27 tax year there are no penalties for missing a quarterly update deadline. It is a first-year grace period. From later years, a points-based regime applies: one point per missed submission, a £200 penalty at four points, and £200 for each further late submission after that. You should still file on time to build good habits, but a slip in 2026/27 will not cost you a penalty.
Missed payment on account
Late-payment penalties do apply from the year you join MTD. In your first MTD year there is no penalty if you pay the tax, or agree Time to Pay, within 30 days of the due date. After that, penalties start once payment is more than 15 days late, and interest runs from the due date. In other words, do not let the relaxed reporting rules convince you that a payment on account is optional. It is not. See our full MTD for Income Tax guide and how the Final Declaration replaces Self Assessment for the wider picture.
Who does MTD ITSA apply to in 2026/27?
From 6 April 2026, MTD for Income Tax is mandatory for sole traders and landlords whose qualifying income (gross turnover before expenses) is over £50,000, assessed on the 2024/25 tax return. The threshold drops to over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028, so many more people will be brought in over the next two years. If you are in scope, you need digital records and quarterly updates via compatible software, and your Final Declaration replaces the Self Assessment return. None of this changes your payment dates. Read what the first 7 August 2026 deadline involves to prepare.
Frequently asked questions
Do I pay tax with my MTD quarterly update?
No. A quarterly update is a report of your year-to-date income and expenses only. No tax is paid with it. Your tax is still paid through payments on account on 31 January and 31 July, with a balancing payment the following 31 January.
Does MTD change the 31 July payment on account?
No. The 31 July payment on account is unchanged under MTD for Income Tax. It remains due on 31 July, usually at half of your previous year's tax bill, and lands independently of your quarterly-update dates.
When is the first MTD quarterly update due?
The first-ever MTD ITSA quarterly update, covering 6 April to 5 July 2026, is due by 7 August 2026. No tax is paid with it. The remaining 2026/27 updates are due 7 November 2026, 7 February 2027 and 7 May 2027.
Will payments on account be abolished under MTD?
No. Payments on account have not been abolished under MTD for Income Tax, and there is no announced date to do so. You still make two payments on account on 31 January and 31 July under the same rules as Self Assessment.
Sources
- GOV.UK: Understand your Self Assessment bill, payments on account
- GOV.UK: Making Tax Digital for Income Tax collection
- GOV.UK: Check if you are eligible for Making Tax Digital for Income Tax
- GOV.UK: Self Assessment tax returns, deadlines
- GOV.UK: Pay your Self Assessment tax bill
Not sure how your quarterly updates and payments on account line up for your own income? Book a free call with Zmartly. We are CIMA-regulated and our qualified accountants will keep your MTD reporting and your payment dates on track, so neither one catches you out.
