What are the penalties for Making Tax Digital?

Each missed Making Tax Digital deadline earns one penalty point, and at 4 points HMRC charges £200. Late tax gets a separate penalty: 4% at day 15 and 4% at day 30 for 2027-28.

Making Tax Digital for Income Tax (MTD) comes with a new penalty system. It replaces the old £100 late filing fine with points, and it replaces the old 5% late payment charges with penalties that grow the longer tax stays unpaid. The rules below follow GOV.UK as checked on 16 October 2026.

Late submission: points, then £200

You get one penalty point for each quarterly update or tax return deadline you miss. You get only one point per deadline, even if you have two businesses and both updates are late.

When you reach 4 points, HMRC charges a £200 penalty. Every further missed deadline while you are at 4 points brings another £200. If you are also VAT-registered, your VAT points are counted separately.

Here is how a year could go for a plasterer who joined in April 2026:

The first-year relief for each group

GOV.UK says there are no penalties for missing a quarterly update deadline for the 2026-27 tax year. That helps the group that joined in April 2026. Their 2027-28 updates can earn points, so for them the first point for a late update is possible on 7 August 2027.

At the Budget on 28 October 2026 the government said people who must join in April 2027 will get no penalty points for late 2027-28 quarterly updates either. The updates must still be sent before the tax return. For that group, the earliest a late update can earn a point is 7 August 2028. Nothing like this has been announced for the April 2028 group.

Neither relief covers tax returns or payments. A late MTD tax return still earns a point.

Late payment penalties

These apply to tax not paid in full by the due date, such as your balancing payment on 31 January. They do not apply to payments on account.

The 10% yearly rate runs until you pay, for up to 2 years. In your first year on the new penalties, you get 30 days instead of 15 before a penalty is charged, but only once. Late payment interest is charged on top from the first day; GOV.UK gives the rate as 7.75% from 9 January 2026.

Worked example. A landlord who joined in April 2026 owes £5,000 for 2027-28, due 31 January 2029, and pays 40 days late. That is 4% at day 15 (£200), 4% at day 30 (£200), and 10% a year for the 10 days from day 31 (£13.70). The penalties come to £413.70, plus interest. This is an example only.

If you cannot pay, contact HMRC before the deadline. If a payment plan is agreed and you keep to it, penalties pause from the date you got in touch.

What this means for you

One late update will not cost you money, but while you are below 4 points each one stays on your record for 24 months, and four of them do. The safest plan is to treat every quarterly deadline as fixed from your first one, relief or not, and to pay your January bill on time or agree a plan early.

From April 2027 the new penalties apply to everyone who files a personal Self Assessment return, not just MTD users. The threshold can be lower outside MTD: GOV.UK says someone who becomes exempt in 2027-28 moves from 4 points to 2.

Your 2025-26 return, due 31 January 2027, is still under the old rules: £100 if late, then daily penalties after 3 months.

Steps to avoid MTD penalties

1. Check your start date with the free MTD check, so you know which tax year your points start from.
2. Diary the four update deadlines, 7 August, 7 November, 7 February and 7 May, and the 31 January return and payment date.
3. Keep your records current so each update is ready soon after the period ends.
4. Send a nil update for a quarter with no income. A missing update still earns a point.
5. Set money aside for 31 January and 31 July. If you will struggle to pay, call HMRC before the deadline.
6. Check your points in your HMRC online account, and appeal any you disagree with using the letter HMRC sends.

The trades section and the landlord section have more on getting ready for MTD.