Under Making Tax Digital for Income Tax the end of year process is still a tax return, but it is completed and submitted through compatible software rather than the old online return. After the fourth quarterly update, the taxpayer or main agent makes year end adjustments, adds all other income and gains, checks HMRC’s calculation and submits a declaration by 31 January after the tax year. HMRC’s guidance now calls this “submit your tax return”; “final declaration” is the term from the original design.

Is the final declaration a new kind of return?

Not in substance. HMRC’s report on the outcome of the Making Tax Digital small business review described the original design as having an End of Period Statement for each income source, followed by a final declaration presenting the finalised position across all income sources, which it said was equivalent to the current Income Tax return. Following Autumn Statement 2023 the government removed the End of Period Statement, so the year end now consists of adjustments and a single return.

The legal obligation is in regulation 8 of the Income Tax (Digital Obligations) Regulations 2026 (SI 2026/336): a person required to deliver a return for a digital obligation tax year must use functional compatible software to do so. The return is still the personal return required by notice under section 8 of the Taxes Management Act 1970. The return for the tax year before the client starts is filed through ordinary Self Assessment; HMRC gives the example that a client starting on 6 April 2026 files the 2025 to 2026 return under the current rules by 31 January 2027.

What happens between the fourth quarterly update and submission?

The fourth quarterly update, due by 7 May after the tax year, gives HMRC cumulative totals for each business for the whole year. HMRC’s guidance on adjusting income lists the work that may follow:

  • claiming reliefs or allowances, such as the trading income allowance or Rent a Room relief;
  • tax adjustments, such as removing disallowable expenses;
  • accounting adjustments, such as prepayments and accruals, where traditional accounting is used rather than the default cash basis;
  • adjustments where the accounting period does not match the tax year;
  • capital allowances claims, which HMRC will not process until the return is submitted.

Most adjustments are made by changing the annual total for a category in the software, rather than editing every transaction. If the underlying records are wrong, HMRC says to correct the digital records, and if the fourth update has already gone, either resend it or adjust the category total and reflect the change in the records. Regulation 17 of SI 2026/336 requires corrections to the fourth update to be given no later than the return deadline. The cash basis and accruals page covers the choice of accounting basis.

What other income has to be added?

Quarterly updates only cover self employment and property. The return must include every other taxable source. HMRC says it will add information it holds, including:

  • PAYE employment income and pensions;
  • student and postgraduate loan details;
  • taxable state benefits;
  • Construction Industry Scheme deductions;
  • Capital Gains Tax residential property disposals;
  • Marriage Allowance claims.

The taxpayer or agent must check those figures, and must add items HMRC does not hold, including savings interest, a share of partnership profit, dividends, payrolled benefits in kind not subject to Class 1A National Insurance contributions, and any other income or gains. A sole trader who is also a partner does not keep digital records for the partnership share, but it must still go on the return.

How is the return submitted?

HMRC sets out the steps for an agent:

  1. Confirm in the software that the return is ready to submit.
  2. View and check the tax calculation.
  3. Share a copy of the information being submitted with the client.
  4. Ask the client to check it and give written confirmation that it is correct and complete.
  5. Submit by declaring that the information and calculation are correct and complete to the best of your knowledge.

Only the main agent can submit a client’s return; a supporting agent cannot, as explained in main and supporting agents under MTD. The written approval step fits the process described in our page on client approval before filing.

Two limits are easy to miss. A repayment cannot be claimed in the return through Making Tax Digital; HMRC points to a separate route. And if the software will not produce a calculation the agent agrees with, HMRC says to contact the software provider first and then tell HMRC as soon as possible if the issue cannot be resolved.

When is it due, and what are the penalties?

The return is due by 31 January following the end of the tax year, and can be submitted any time after the year ends. For a client who started on 6 April 2026, HMRC’s timetable gives 31 January 2028 for the 2026 to 2027 return. Payment dates do not change. Missing the return deadline earns a penalty point under the new regime; at the 4 point threshold a £200 penalty is charged, and a further £200 for each later missed deadline. Late payment penalties are charged separately and depend on how long the tax remains unpaid. Points for late quarterly updates are not applied for 2026 to 2027, but HMRC is clear that the quarterly updates must still be sent before the return can be submitted. Our HMRC penalties table sets out the wider regime.

How are mistakes corrected after submission?

HMRC says a submitted return should be changed through compatible software, within 12 months of the submission deadline, and the online account will then show an updated calculation. Regulation 16 of SI 2026/336 allows notice of amendment under section 9ZA of the Taxes Management Act 1970 to be given using compatible software. Changes to records before submission should be made in the records, not by amending a return. See amending a tax return for the general rules.

How does this look for a typical client?

Illustration only. Sam is a self employed electrician who also has a salaried part time job and bank interest. His bookkeeper sends the fourth quarterly update for 2026 to 2027 in April 2027. In the autumn his accountant, the main agent, reduces the phone category total for private use, claims capital allowances on a new van, checks the PAYE figures HMRC has added, adds the bank interest, sends Sam a copy and gets his written confirmation, then submits in December 2027. The balancing payment is still due by 31 January 2028.

What mistakes come up most often?

  • Leaving year end adjustments until January, when the fourth update was available from May.
  • Not checking the figures HMRC has added, which its guidance says must be checked before submission.
  • Forgetting dividends or partnership shares because they are not in the quarterly records.
  • Expecting to claim a repayment in the return.
  • Correcting the return when the digital records should have been corrected.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.