Reliability of in-year tax estimates

After each quarterly update, MTD-compatible software can retrieve an in-year tax estimate from HMRC's API. Treat it as a provisional forecast for budgeting — not your final tax bill.

HMRC states that any in-year calculation is an estimated forecast and that no tax needs to be paid until the final declaration. Software should show a disclaimer along the lines of: "This calculation is only based on information HMRC have received up to [date]. It may change as further data is submitted."

What the estimate includes — and what it misses

The figure reflects only income and expenses you have already submitted. Early in the year, with few quarterly updates, HMRC is effectively annualising partial data. It may omit items that have not been sent through the relevant MTD endpoints, such as:

• Dividends and savings interest
• Pension contributions (for tax relief)
• Capital gains
• Marriage Allowance and other reliefs submitted via additional-information APIs
• Year-end adjustments such as capital allowances, loss relief, or a tapered personal allowance

Because of these gaps, the in-year forecast can be misleading if you have significant non-business income or deductions. Professional bodies warn that clients with large investment, interest, or pension income may find the estimate inaccurate — some accounting platforms let you turn the auto-estimate off for those clients.