MTD penalties for Income Tax: what happens if you miss a deadline
Making Tax Digital for Income Tax comes with a new penalty system: points for late submissions and a separate set of penalties for late payment. It applies to sole traders and landlords who are using Making Tax Digital for Income Tax. Not everyone who works for themselves is a sole trader, and the other ways of being self-employed are outside these rules for now.
The short version for the 2026 to 2027 tax year: no penalty points for late quarterly updates. A late tax return or a late payment is still penalised. Here is how each part works.
This guide is general information, not individual tax advice. HMRC’s penalties guidance is the source for everything below.
When the new penalties apply to you
The new penalties start in the tax year you join Making Tax Digital for Income Tax. The old rules still cover earlier years. If you started on 6 April 2026, your 2025 to 2026 tax return, due by 31 January 2027, is still under the current Self Assessment penalties.
Quarterly updates in 2026 to 2027: no penalty points
For the 2026 to 2027 tax year, HMRC does not give penalty points for missing a quarterly update deadline. You still need to keep digital records and send your quarterly updates, including the final one for the tax year, before you can submit your tax return.
Each update covers the tax year from the start, so a late first update is not wasted work. It simply carries everything since 6 April. All MTD deadlines are here.
1 point per missed deadline, and a £200 penalty at 4 points
Late submissions are points based. You get 1 point for each deadline you miss: your tax return, and your quarterly updates for tax years after 2026 to 2027.
- • The threshold is 4 points.
- • When you reach it, you get a £200 penalty.
- • Each further missed deadline while you are at the threshold means another £200.
- • You get only 1 point per deadline, even if you have more than 1 business and send several quarterly updates late.
If you are also registered for VAT, your points for Making Tax Digital for Income Tax are kept separately from your VAT points.
Points expire, and here is how to clear them
Below the threshold, each point is removed automatically 24 months after the missed deadline.
At the threshold, points do not drop off one by one. To clear them all, you need to:
- • send your quarterly updates and submit your tax return on time for 12 months
- • send any outstanding quarterly updates and tax returns from the previous 24 months
Your HMRC online services account shows the date your points will be removed.
Paying late costs a percentage of the tax owed, not points
Late payment penalties are not points based. They apply to each payment you make late, such as the balancing payment on your tax bill. They do not apply to payments on account. Late payment interest is charged from the first day the payment is late until you pay in full.
| How late | 2026 to 2027 tax year | 2027 to 2028 tax year |
|---|---|---|
| Up to 15 days | No penalty | No penalty |
| 16 to 30 days | 3% of the tax owed at day 15 (no penalty in your first year) | 4% of the tax owed at day 15 (no penalty in your first year) |
| 31 days or more | 3% at day 15 plus 3% at day 30, then 10% a year, charged daily from day 31 until paid or for up to 2 years | 4% at day 15 plus 4% at day 30, then 10% a year, charged daily from day 31 until paid or for up to 2 years |
In your first year under the new penalties, you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan. After that first year it is 15 days. You get the 30-day period only once, so if you volunteered first, you keep 15 days when it becomes compulsory.
If you cannot pay on time
Contact HMRC as soon as you can. If you agree a payment plan and keep to it, penalties are paused from the date you contacted HMRC.
Can you appeal an MTD penalty?
Yes. HMRC sends a letter for each late payment penalty, each penalty point and each £200 penalty. If you disagree, you can appeal, and the letter tells you how.
I am volunteering. Do the same penalties apply?
Not all of them. Volunteers have their own penalty rules, and HMRC contacts you to confirm when the new penalties start to apply to you. Read that page before you rely on it.
How to keep penalties away
MTD penalties are about timing, and timing is easier when the records are already there.
- • Keep your records as you go, not the week before a deadline.
- • Send each quarterly update by its deadline, even when the year has been quiet. If there is nothing to report for an income source, you still tell HMRC.
- • File your tax return and pay by 31 January after the end of the tax year.
- • If you cannot pay, contact HMRC before the payment is due.
In EasyInvoice, the invoices you already send become your digital records, and the home screen reminds you when a quarterly update is due within 10 days. The cleaner’s invoices, the tutor’s term fees and the flat’s rent are each recorded against an income source as you work, so the update is a check-and-send job, not a weekend project.
Make the next deadline a check-and-send job.
In EasyInvoice, the invoices you already send become your digital records. Add other income and expenses, check the quarterly update and send it to HMRC. 3 months free.
If you’re looking for EasyInvoice for landlords and sole traders in the UK, download the app today
Frequently asked questions
Are there MTD penalties in the first year?
For the 2026 to 2027 tax year, HMRC does not give penalty points for late quarterly updates. Penalties still apply to a late tax return and to late payment of your tax bill.
How much is the MTD late filing penalty?
The Making Tax Digital for Income Tax late filing penalty is £200, charged when you reach 4 penalty points, and again for each further missed deadline while you stay at 4 points.
Does HMRC charge daily fines for late MTD submissions?
Late submission penalties for MTD for Income Tax are points based: you get a £200 penalty when you reach the threshold. Late payment works differently. After 30 days late, a rate of 10% a year is charged daily on the unpaid tax, on top of the percentage penalties.
Are MTD points shared with VAT?
No. Penalty points for Making Tax Digital for Income Tax are kept separately from penalty points for VAT.
Can I appeal an MTD for Income Tax penalty?
Yes. HMRC sends you a letter for each late payment penalty, penalty point and £200 penalty, and the letter explains how to appeal. You can also view and appeal penalty points and penalties in your HMRC online account.
Is there a penalty holiday for MTD for Income Tax?
Partly. For the 2026 to 2027 tax year, HMRC does not give penalty points for late quarterly updates. You still need to send your quarterly updates before you can submit your tax return, and penalties still apply to a late tax return and a late payment. In your first year of the new penalties you also have 30 days from the due date to pay in full or set up a payment plan.
Do MTD penalties apply if I volunteer?
Volunteers do not get penalties for late quarterly updates while they are volunteering. Penalty points still apply for a late tax return, and the threshold for volunteers is 2 points, which brings a £200 penalty. You agree to the new penalties when you sign up, and you cannot go back to the old ones once you have agreed, even if you stop volunteering.
How long do MTD penalty points last?
If you are below the 4-point threshold, HMRC removes each point automatically 24 months after the missed deadline. Once you reach the threshold, points are not removed one by one. You need to send your quarterly updates and tax return on time for 12 months and send any outstanding updates and returns from the previous 24 months. Your HMRC online account shows the date your points will be removed.
What if I cannot pay my tax bill on time?
Contact HMRC as soon as you can to talk about a payment plan. If a plan is agreed and you keep to it, penalties are paused from the date you contacted HMRC.
