MTD Deadlines & Penalties Explained: What Happens If You Miss the MTD for ITSA Deadline?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) brings a new, points-based system for late submissions and a separate regime for late payments. Below we explain MTD penalties, appeal rights and what happens after a missed MTD deadline.

*This article is accurate as of 20 November 2025. HMRC may update Making Tax Digital (MTD) rules, deadlines and penalties. If you’re reading this after that date, check the latest HMRC guidance before acting.

1) What are the HMRC penalties for missing the MTD deadline?

Late submission (points & £200 fines):

• You get 1 point each time you miss a submission deadline. Points build up separately for each tax (ITSA vs VAT). When you reach the threshold, you’re charged £200, and another £200 for each further late submission while you stay at the threshold. 

Late payment (percentage penalties & interest):

General rules

• Interest is charged from day 1 on any unpaid amount.

• Late payment penalties do not apply to payments on account.

2024/25 tax year

• Up to 15 days late: no late payment penalty.

• 16-30 days late: first late payment penalty = 2% of the amount outstanding at day 15.

• 31 days or more late:

º first late payment penalty becomes 2% of what was outstanding at day 15 plus 2% of what is still outstanding at day 30, and

º second late payment penalty = 4% per year, charged daily from day 31 until paid in full.

2025/26 tax year onwards

• Up to 15 days late: no late payment penalty.

• 16-30 days late: first late payment penalty = 3% of the amount outstanding at day 15.

• 31 days or more late:

º first late payment penalty becomes 3% of what was outstanding at day 15 plus 3% of what is still outstanding at day 30, and

º second late payment penalty = 10% per year, charged daily from day 31 until paid in full.

2) How much is the MTD late filing penalty in 2026?

From April 2026, when you’re mandated for MTD for ITSA, missing submissions adds points. When you hit the threshold (4 for quarterly updates; 2 for the annual return), the fine is £200. Every further late submission while at the threshold is another £200. HMRC also sets “periods of compliance” to reset points (see below).

How points are removed or reset?

• Individual points expire automatically after 24 months if you have not reached the threshold.

• If you have reached the threshold, you must complete a period of compliance to reset to zero (for ITSA annual returns, 24 months of on-time filing).

3) Will HMRC charge daily fines for MTD non-compliance?

Late submissions: no daily fines. The system is points-based and a £200 penalty applies when you reach the threshold. (Quarterly updates for volunteers don’t get late-submission penalties.) 

Late payments:

• Up to 15 days late: no late-payment penalty

• 16–30 days late: first percentage penalty – 2% (2024/25) or 3% (2025/26 onwards) of the amount outstanding at day 15

• 31 days or more late: the first penalty becomes 2% + 2% (2024/25) or 3% + 3% (from 2025/26) (on amounts outstanding at day 15 and day 30). A second penalty accrues daily from day 31 at 4% p.a. (2024/25) or 10% p.a. (from 2025/26) until paid in full. Interest runs from day 1.

• Setting up a Time to Pay arrangement can stop late-payment penalties from increasing.

MTD for ITSA is coming. Don’t leave it to the last minute – join the waiting list today and we’ll notify you when the app is ready.

4) Can I appeal against an MTD late penalty?

Yes. You can ask HMRC for a review or make a formal appeal. You usually have 30 days from the date on the penalty notice to contact HMRC or appeal.

You can appeal online, or by post using SA370 (individuals) or SA371 (partnerships)

HMRC allows appeals where you have a reasonable excuse (for example, something unexpected that stopped you filing or paying on time).

5) Do missed MTD deadlines affect both VAT and Income Tax?

Points are kept separately for VAT and ITSA. You could hold points (and get £200 fines at threshold) in both if you file late for each tax. 

6) I’m a volunteer now – do the same penalties apply?

If you volunteer for MTD for ITSA before mandation, HMRC applies the points system to your annual return only (threshold 2, then £200). There are no late-submission penalties for missing quarterly updates while you’re volunteering. Payment penalties and interest still apply if you pay late.

7) What counts as a “missed MTD deadline” in practice?

For most taxpayers deadlines under MTD for ITSA are:

• Quarterly updates (4 per year) – due 7 August, 7 November, 7 February, 7 May (or the same dates for calendar quarters, depending on your software/setup). Missing any of these can earn a penalty point once you’re mandated for MTD.

• Final annual return (Final Declaration) – due 31 January following the tax year; late filing adds a point (and can trigger the £200 once you’re at the threshold).
(Deadlines and how points work are set out in HMRC policy and volunteer guidance.)

8) How can I reduce the risk of MTD penalties?

• File and pay on time – obvious but effective.

• If you cannot pay, contact HMRC quickly to arrange Time to Pay (this can stop late-payment penalties from increasing, though interest still applies).

• Use compatible software and keep your digital records up-to-date so your quarterly updates are ready before each deadline. (Penalties are about timelines – good record-keeping makes timeliness easier.)