MTD for Income Tax Penalties Explained: Points, £200 Fines & the First-Year Easement
How the points-based penalty system works for Making Tax Digital for Income Tax: how points build up, when the £200 fine hits, the first-year easement for 2026/27, and the separate late-payment penalties.
The short answer
MTD for Income Tax uses a points-based penalty system for late submissions: each missed quarterly update earns one point, and once you reach four points you get a £200 penalty (with further £200 fines for each later default). Crucially, for the 2026/27 tax year there are no late-submission penalties at all for quarterly updates for those mandated into MTD — though you must still file them, and this concession does not cover the final declaration. Late payment of tax is penalised separately, based on how overdue it is, and that system still starts in April 2026.
Miss a Making Tax Digital deadline and you won't get an instant fine for a single slip — but the new points-based system means repeated lateness adds up fast. Here's how the penalties actually work, and where the traps are.
Two separate penalty systems
It's vital to understand there are two distinct regimes:
- Late submission — for filing your quarterly updates or final declaration late. This uses penalty points.
- Late payment — for paying the tax you owe late. This is charged separately, based on how overdue the payment is.
You can trip one without the other, so treat them independently.
Late submission: the points system
Instead of an immediate fine for every late filing, HMRC gives you a point each time you miss a submission deadline. A £200 penalty is triggered once you hit the threshold.
For MTD for Income Tax filers, the threshold is four points:
| Late submissions | Result |
|---|---|
| 1st | 1 point |
| 2nd | 2 points |
| 3rd | 3 points |
| 4th | 4 points → £200 penalty |
| 5th and beyond (while at threshold) | further £200 each time |
A few important details:
- Points are per submission obligation, and each late filing adds one.
- Once you're at the threshold, every additional late submission brings another £200 — the points don't keep climbing, the fines do.
- Points can be removed after a sustained period of compliance (broadly, meeting your deadlines for a set time and having no outstanding submissions), or automatically after around 24 months where you haven't reached the threshold.
No quarterly-update penalties in 2026/27 (the soft-landing year)
HMRC has confirmed a significant concession for the first year. Put plainly:
There are no late-submission penalties for missing a quarterly update deadline in the 2026/27 tax year for taxpayers required to join MTD. Not just "no points" — no penalties at all for late quarterly updates that year.
This gives first-year filers real breathing room to get used to the routine. But there are three sharp edges — don't misread the concession:
- You still have to file the updates. You cannot submit your tax return until your quarterly updates are in, so skipping them just blocks your year-end. The concession removes the penalty, not the obligation.
- It does not cover the final declaration. If you miss the final declaration deadline (31 January 2028 for 2026/27), you can still receive a penalty point.
- It does not cover late payment. The new late-payment penalty system still launches in April 2026 — paying your tax late is charged regardless (see below).
From 2027/28 onwards the full points system applies to quarterly updates, and HMRC has confirmed the new penalty rules will extend to all Self Assessment taxpayers, not only those in MTD. So the soft landing is a one-year-only cushion on quarterly updates — the year-end and payment obligations are live from day one.
Late payment penalties (separate, and steeper)
Paying your tax late is charged based on how long it stays unpaid, and the rates were increased from April 2025. Broadly, the longer the tax is overdue, the higher the charge, and interest accrues on top. The exact percentages change over time, so check HMRC's current figures — but the principle is simple: pay on time or it gets more expensive the longer you leave it.
How to stay penalty-free
The good news is that avoiding penalties is entirely within your control:
- File every quarterly update on time — even a nil update counts and stops a point.
- Don't skip the final declaration — it's not covered by the first-year easement.
- Pay by 31 January (and 31 July for payments on account).
- Use software that tracks your obligations so you always know which periods are open and when they're due.
How ThisQuarter helps. ThisQuarter reads your obligations straight from HMRC and shows which quarters are open and their deadlines, so you're never guessing. Every submission is confirmed with a stored receipt. See how it works.
The bottom line
A single late update won't ruin you, but the points add up and the £200 fines follow. For 2026/27 there are no penalties for late quarterly updates at all, so lean on that soft-landing year if you need to — but you must still file the updates, and the final declaration and your payment dates remain hard deadlines, because those aren't forgiven.
Frequently asked questions
How do MTD penalty points work?
Each late submission earns one penalty point. Once you reach the threshold — four points for quarterly (roughly monthly-to-quarterly) filers — you get a £200 penalty, and a further £200 for every subsequent late submission while you're at the threshold. Points can expire after a period of compliance.
Are there penalties for missing a quarterly update deadline in 2026/27?
No. HMRC has confirmed there are no late-submission penalties for quarterly updates during the 2026/27 tax year for taxpayers required to join MTD — not just no points, no penalties at all. You must still submit the updates (you can't file your tax return until you have), and the concession does not cover the final declaration or late payment of tax, both of which can still be penalised. From 2027/28 the full points system applies.
How much is the MTD late submission penalty?
£200 once you reach the points threshold, then £200 for each further late submission while at the threshold. Individual late updates below the threshold earn points rather than an immediate fine.
Are late payment penalties the same as late submission penalties?
No — they're separate. Late submission uses the points system. Late payment of the tax you owe is charged based on how overdue the payment is, and those rates were increased from April 2025. You can be penalised for one without the other.
How do I avoid MTD penalties?
File every quarterly update on time (even a nil one), make the final declaration by 31 January, and pay your tax by the due date. Software that tracks your obligations and reminds you of open periods is the simplest safeguard.
Related reading
The Final Declaration: How MTD Replaces the SA100 Tax Return
What the Making Tax Digital final declaration is, how it replaces the old SA100 Self Assessment return, what income you add at year-end, and the crystallisation step that finalises your tax.
Consolidated vs Itemised Expenses in Your MTD Quarterly Update
When you can report a single consolidated expenses figure in a Making Tax Digital quarterly update versus itemising every category, the VAT-threshold rule, and what 'disallowable' amounts mean.
Cash Basis vs Accruals for MTD: Which Should You Use?
The difference between cash basis and accruals (traditional) accounting for Making Tax Digital, why cash basis is now the default for sole traders, and how to choose the right one for your MTD quarterly updates.