Making Tax Digital · Sole traders
How to read an estimated tax bill in your bookkeeping software
ONLY£15A MONTHAn estimated tax bill is useful when you know what it includes.
An estimated tax bill is useful when you know what it includes. It may be based on incomplete income, projected trading results or information HMRC already holds. Treat the number as a planning tool with assumptions, not an exact bill simply because it updates quickly.
Check the ingredients
Start with the period covered and whether the forecast is year-to-date or annualised. Check income, allowable expenses, outstanding adjustments, personal income and tax already paid. One person does not receive a fresh Personal Allowance for every business.
For 2026/27, the standard Personal Allowance is £12,570 and can taper at higher adjusted net income. Scottish non-savings income uses different bands. HMRC publishes the Income Tax rules.
For ordinary self-employed Class 4 NIC in 2026/27, HMRC lists 6% on relevant profits over £12,570 up to £50,270 and 2% above that. Property income should not automatically be put through the same NIC calculation. Check the NIC guidance.
Avona's current pricing information describes tax insights. Confirm the scope of the estimate displayed and whether other personal income has been included.
Worked example: an estimate missing salary
A consultant sees a forecast based only on £20,000 annual trade profit. The consultant also has £35,000 employment income. A calculation treating the trade as the only income could incorrectly allocate a full Personal Allowance to it and understate the combined liability.
Adding or confirming the employment information changes the estimate. That does not mean the business suddenly earned more; the forecast now covers more of the person's tax position.
Treat a tax estimate as a forecast
A bookkeeping profit is not necessarily your final taxable income, and an estimated liability is not always the amount still to pay. Employment income, pensions, savings, reliefs, tax already deducted and payments on account can all affect the final position.
An estimate is most useful when you understand its coverage. Check whether it uses year-to-date figures or projects a full year, whether all income sources are included and whether adjustments are still outstanding. A strong summer followed by a quiet winter should not automatically be projected as twelve identical months.
HMRC explains that estimates after quarterly updates can be incomplete when other income is missing or accounting periods do not align with the tax year. Read the estimate guidance within quarterly reporting.
Use a reviewed forecast to inform a cash reserve, then compare it with actual HMRC liabilities and payment dates. If you transfer money into a tax savings account, that transfer is not a business expense. If an estimate changes sharply, investigate the records and assumptions before assuming that your tax position itself has changed by the same amount.
A review that checks more than the total
Start with coverage: the correct person, business and period, plus all relevant accounts and cash records. Then look at completeness. A feed can be connected today while still missing an earlier week. Confirm the earliest and latest transactions against the source.
Next, inspect unusual items. Large transfers, loan receipts, refunds, net settlements and private purchases often need more context than a bank description provides. Check for duplicate imports where a statement overlaps a live feed. An automatic warning is useful evidence to investigate, not proof that the entry must be removed.
Finally, review category totals. A category unexpectedly showing zero, a large increase or a negative amount deserves an explanation. You do not have to make every annual tax adjustment at this stage, but you should understand the records behind the summary you approve.
HMRC explains what quarterly updates contain. Keep the approved version and the resulting acknowledgement together. If something later changes, correct the source record and use the software's supported update process so you can explain which figures are current.
Keep the reporting dates separate from payment dates
The standard first update for 2026/27 covers 6 April to 5 July 2026 and was due by 7 August 2026. The second covers 6 April to 5 October 2026 and is due by 7 November 2026. The third and fourth deadlines are 7 February 2027 and 7 May 2027. These are cumulative updates, not four isolated sets of three-month totals.
Calendar periods have different cut-offs and the same filing deadlines. Check the setting for each business rather than assuming the dates from a bank statement. HMRC lists both reporting calendars.
The annual return for 2026/27 is due by 31 January 2028. The earlier 2025/26 return normally remains due online by 31 January 2027. Keeping those years distinct avoids a common transition-year misunderstanding.
Payments on account, where required, follow their own January and July timetable. An update acknowledgement confirms a reporting event; it does not confirm that an outstanding tax bill has been paid. Check your actual HMRC account and payment obligations separately from the software's progress indicators.
Use the number with a review date
Check assumptions after a major change, compare forecasts with actual payment obligations and record amounts already paid. Investigate unexpected jumps before moving cash. A tax savings transfer is sensible planning but does not itself reduce taxable profit.
Take the next step
Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.