Making Tax Digital · Sole traders
Your MTD figures do not balance: a reconciliation guide for deadline week
ONLY£15A MONTHA difference between records is a signal to investigate, not an amount to remove with an invented adjustment.
A difference between records is a signal to investigate, not an amount to remove with an invented adjustment. Start by identifying which figures are being compared and whether they cover the same thing. Bank balance, sales, profit and taxable income are not interchangeable totals.
Identify the type of difference
Check whether the issue concerns a bank reconciliation, a provider settlement, category totals or a tax estimate. Confirm dates, opening balances and included accounts. Comparing different periods can create an apparent error even when each report is internally consistent.
For bank differences, check missing or duplicated transactions and transfers. For provider payouts, reconcile gross sales, refunds, fees and retained balances. For tax estimates, check other income, adjustments and tax already paid.
Work from the source
Use statements and supporting records to trace individual entries. Equal grand totals do not prove correctness because two errors can cancel. Conversely, different totals may be expected if one is gross sales and the other is the net bank payout.
Correct actual errors with a clear note. Do not create a fictional expense or sale labelled “balancing adjustment” to make an unexplained difference disappear. If an estimate or permitted accounting adjustment is needed, establish its proper basis.
Worked example: the £250 difference
A sales report shows £5,000 while the provider transferred £4,750. The statement shows £200 fees and £50 refunds. The difference is explained by real components; it is not £250 of missing sales.
The records should show those components consistently. If the net payout is recorded as sales and the £200 fee deducted again, the business introduces a second error while trying to resolve the first.
Reconcile receipts, not just bank payouts
A bank deposit is not always the original sale. A platform, card processor or agent may deduct fees before sending you the balance. Keep the statement showing the gross amount, deductions, refunds and final payout, then explain the difference in your records.
Cash needs the same attention. Record customer cash when received under the cash basis, even if some of it is spent before the rest reaches the bank. Banking cash already recorded as a sale is a transfer between your cash and bank records, not another sale.
HMRC's record-keeping guidance covers income and business expenses. The useful practical test is whether another person could follow a payment from the original sale to the amount received without counting it twice.
Do not use bank feeds as a reason to ignore payment accounts, credit cards, cash or payments made personally for the business. List every place where business money passes, choose the source for each type of transaction and review transfers between those sources. This turns reconciliation into a repeatable check rather than a search through several unrelated statements.
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.
Understand the first-year concession
HMRC states that there are no penalties for missing quarterly-update deadlines for the 2026/27 tax year. That concession does not remove the digital-record or quarterly-reporting obligations, and it does not make all tax returns and payments penalty-free. Read the precise penalty guidance.
Outstanding quarterly reporting must be dealt with before completing the relevant annual return. However, a missed August 2026 update should not be described as an automatic penalty on the separate 2025/26 return due in January 2027. The 2026/27 annual-return deadline is January 2028.
After the first-year concession, the points rules apply to missed quarterly deadlines as described by HMRC. Do not assume that multiple businesses create multiple points at the same deadline. Annual-return rules, late-payment penalties and interest require their own checks.
If you have fallen behind, establish what is outstanding and work through the supported catch-up process. Keep evidence of technical problems and contact the appropriate support team with the business, period and error details. The useful next step is a complete record and an accepted update, rather than guessing what a generic warning might mean.
Escalate a defined problem
Give your adviser or support team the reports, period and exact difference through an appropriate channel. Explain what you have checked. Complete the review before approving figures, and use the applicable catch-up rules if the issue cannot be resolved by the deadline.
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.