You have opened Xero, found an obligation period sitting there waiting for you, and you are not entirely sure what happens if you press the button. Plenty of people are in exactly that position this autumn.

Here is the short version. A quarterly update is the submission that sole traders and landlords now send to HM Revenue and Customs four times a year under Making Tax Digital for Income Tax. Xero adds up your income and expenses, sorts them into set categories, and sends the totals. It does not send your invoices. It is also not your VAT return, which trips up a surprising number of people in their first year.

The submission itself takes minutes. The work sits in everything that happens before it, which is really just bookkeeping done on time.

This guide covers the checks to run first, the six steps to file, what to do when you realise a figure was wrong, and how the four updates lead into your final declaration. It follows the same process our tutors work through on our live Xero courses, taught by accountants who file these submissions for their own clients.

Here’s what we cover:

What is a quarterly update in Xero?

A quarterly update is a summary of your business income and expenses that Xero sends to HMRC every three months under Making Tax Digital for Income Tax. Xero groups your transactions into standard categories and totals them from the start of the tax year. You send one update for each business you run.

Every update covers the year so far

This is the part that catches people out, and it is worth getting straight early.

Your second update does not cover only July to October. It covers April to October. Your third covers April to January. Each submission restates the whole year to date, refreshed with whatever you have corrected since the last one.

There is a genuine upside to this. A transaction you coded to the wrong account in quarter one does not need a special fix. You correct it in Xero, file the next update as normal, and the right figure reaches HMRC on its own.

One business, one update

Run two businesses and you file two updates. A landlord who also takes on freelance design work sends one update for the rental income and a separate one for the self-employment income.

Xero keeps them apart, which is the reason it matters that your organisation is set up properly at the beginning rather than patched later.

Before you file: five checks worth ten minutes

Almost every problem at submission traces back to bookkeeping that was not quite finished, rather than anything going wrong at HMRC. Run through these first.

1. Bank feeds are in and reconciled. Anything still sitting in the bank feed will not appear in your totals. Import it, code it, reconcile it.
2. Your organisation type is correct. In Xero this needs to be a sole trader or a person, depending on whether the income is from trading or from property. Get this wrong and the Making Tax Digital area behaves oddly.
3. The HMRC connection is live. The link between Xero and HMRC expires from time to time and needs renewing. Check it a week before the deadline, not on the morning of it.
4. Nothing is left uncategorised. Every transaction needs a home. Anything parked in suspense, or coded to a holding account because you were not sure, will skew the figures you are about to send.
5. The awkward items are captured. Cash receipts, business purchases made on a personal card, and any income that landed outside the business account all need recording.

If you are unsure how to code something, flag it and ask rather than guess. A missing transaction is easy to spot later. A wrongly coded one is not.

How to file a quarterly update in Xero, step by step

With the records straight, the submission runs through in six steps.

Step 1: Open the Making Tax Digital for Income Tax area

Sign in to Xero and go to the Making Tax Digital for Income Tax section. Your obligation periods are listed here with their status, so you can see which updates have gone and which are still open.

Step 2: Choose the business and the period

Select the business you are filing for, then pick the period. Read the dates twice. Filing against the wrong period is one of the few mistakes here that creates real work to unpick.

Step 3: Read the category totals properly

Xero shows your income and expenses broken down by category for the year to date. This screen is your last chance to catch a problem before HMRC  has the figures, so give it a proper look rather than a glance.

Step 4: Question anything that looks off

Set the totals against the previous quarter. An expense line showing nothing when you know you spent money, a category that has suddenly doubled, turnover lower than your invoicing suggests: all worth a minute of investigation.

In practice, the answer is nearly always a bill entered twice or something coded to the wrong account on a busy afternoon.

Step 5: Submit to HMRC

When you are happy, submit. You will need your Government Gateway details to authorise it, so have them ready rather than hunting for them mid-process.

Step 6: Save the confirmation

Xero confirms once HMRC has accepted the submission and the obligation status updates. Save or screenshot that confirmation.

One practical warning: HMRC can take up to an hour to register a submission. Filing at four o’clock on deadline day is a risk you do not need to take.

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Quarterly update deadlines for the 2026/27 tax year

You have one month after each period ends. Deadlines land on the 7th of the following month.

At the time of writing, the open period is 6 July to 5 October 2026, with a deadline of 7 November 2026.

Filing on calendar quarters instead

Some businesses prefer to work to month ends so that the update fits their existing routine rather than cutting across it. Xero supports this, and it is worth considering if your bookkeeping already runs monthly. Check the current position on GOV.UK before you change your reporting dates.

What does HMRC actually receive?

Category totals. That is the whole of it.

HMRC gets your turnover and your total spend under each standard expense heading for the year so far. It does not receive individual invoices, bank statements, or customer names.

Several things are deliberately left out at this stage:

• Personal allowances and reliefs
• Capital allowances adjustments
• Other income such as employment, dividends, or savings interest
• Accounting adjustments made at the year end

All of that arrives later. Which is exactly why a quarterly update is not a tax bill, and why the tax figure Xero shows during the year is an estimate built on incomplete information. Treat it as a rough steer for setting money aside, not a demand.

What happens if you get a figure wrong?

This is the question people worry about most, and the answer is reassuring.

Because each update restates the year to date, you correct an earlier mistake by fixing the transaction in Xero and filing your next update as usual. The revised totals replace the old ones. There is no separate amendment process for a quarter you have already sent.

Find the error after your fourth update and the correction happens as part of your final declaration instead.

Two habits are worth building:

• Leave a short note in Xero explaining what changed and why. Six months later, you will be glad you did, and so will your accountant.
• Keep the underlying paperwork. Digital record keeping is a requirement in itself, not simply a way of producing the update.

Quarterly updates versus your VAT return

Two separate obligations, filed separately, on different timetables.

Being registered for VAT does not remove your quarterly update requirement, and filing a VAT return does not count as filing an update. They are different reports about different taxes that happen to arrive at a similar frequency.

What comes after the four updates?

The updates are only part of the picture. After the tax year ends, you complete a final declaration.

That is where everything left out during the year goes in: other sources of income, reliefs, allowances, and any accounting adjustments. The final declaration takes the place of the Self Assessment return you used to file, and it confirms your real tax position.

For the 2026/27 tax year, the final declaration is due by 31 January 2028.

Payment dates have not moved. Income Tax remains payable on 31 January and 31 July under the existing payments on account arrangement. Reporting more often does not mean paying more often, whatever you may have heard down the pub.

Five problems that come up again and again

• The obligation period is not showing. This usually means the HMRC connection was never completed, or your sign-up has not yet processed at HMRC’s end.
• The authorisation has lapsed. Reconnect Xero to HMRC with your Government Gateway details, then refresh the obligations list.
• The totals do not match your own records. Filter your transactions by date and category, then compare them against the submission screen. Duplicated bills and transactions dated outside the period account for most of it.
• Two businesses are showing as one. Separate trades need separate treatment. If consultancy income and rental income are running through one set of accounts, sort that out before you file, not after.
• The property is jointly owned. Only your share belongs in your update. Apportion the income and the costs first.

Why this matters if you are building an accounting career

Making Tax Digital has quietly changed what practices need from their bookkeeping staff, and it has happened faster than most job descriptions have caught up with.

A small practice used to see a sole trader client once a year, usually in a rush somewhere around the middle of January. That same client now generates four submissions plus a final declaration, and every one of them depends on records being current rather than reconstructed from a carrier bag of receipts.

So the hiring has shifted. Practices want people who can keep records clean through the year, notice a miscoded transaction before it reaches HMRC, and explain the process calmly to a client who finds the whole thing unsettling. None of that is learned from reading. It is learned by doing it, ideally somewhere the consequences of a mistake are a tutor’s feedback rather than a client’s penalty.

Both the AAT and ACCA have pointed to digital record keeping as a core skill for finance staff. Software ability sits alongside a qualification rather than replacing it, and employers increasingly expect both.

If you are working towards a bookkeeping or accounts role, running the full cycle on live software is the quickest route to feeling confident. Our Xero Level 1 course covers the record keeping that sits underneath every update. Level 2 moves into reconciliation, journals, and reporting.

Learn Xero properly, with a tutor beside you

Reading a process through is one thing. Doing it on live software, with someone on hand to answer the question you did not know you needed to ask, is another thing entirely.

TaxCare Academy runs live, tutor-led Xero training in small groups, online, for learners across the UK. The courses are built around real business case studies rather than tidy demonstrations, and they are taught by practising accountants. Every course is structured to support a CPD-hours claim, and you receive an employer reference letter on completion.

New to Xero?  Start with Xero Level 1.

Already recording transactions?  Move on to Xero Level 2.

Want the full pathway?  The Complete Xero Training bundle takes you from Level 1 through to Level 3.

Not sure where you fit?  Browse all courses or speak to our team, and we will point you to the right level