Making Tax Digital for Income Tax
MTD for Income Tax penalties, in plain figures
Making Tax Digital replaces the old late-filing penalties with a points system: one point per missed deadline, a £200 penalty at 4 points, and — the part most software marketing skips — no penalties at all on 2026/27 quarterly updates. Late payment is a separate regime with its own percentages. Every figure below is read from HMRC's own guidance, 15 August 2026.
Points for filing late, percentages for paying late — two separate systems
Late submission costs you a point per missed deadline and nothing in cash until you reach 4 points (then £200). Late payment is not points based: it charges a percentage of the unpaid tax the longer it stays unpaid. And quarterly updates for the 2026/27 tax year carry no penalty at all.
"For each quarterly update (for tax years after 2026 to 2027) or tax return deadline you miss, you'll get a penalty point. The penalty point threshold is 4 points. If you reach this, you'll get a £200 penalty." — GOV.UK, Penalties for Making Tax Digital for Income Tax
Not sure which wave you are in, or when your first update is due? Check your MTD start date and every MTD deadline.
| How points are earned | One penalty point for each quarterly update (for tax years after 2026 to 2027) or tax return you file after its deadline. |
| The 4-point threshold | Reaching 4 points triggers a £200 penalty, and a further £200 every time you miss another submission deadline after that. |
| One point per deadline | You get a single point per deadline even if you run more than one business and file more than one quarterly update late. |
| 2026 to 2027 quarterly updates carry no points | There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year — but you must still keep digital records and send the updates before you can submit your tax return. |
| Separate from VAT | If you are also registered for VAT, your Income Tax penalty points are counted separately from your VAT penalty points. |
| Removing points below the threshold | If you stay below 4 points, each point is removed automatically 24 months after the missed deadline. |
| Removing points once you hit the threshold | Points are no longer removed automatically. You must file every quarterly update and tax return on time for 12 months, and submit any outstanding updates and returns for the previous 24 months. |
| How late the payment is | 2026 to 2027 tax year | 2027 to 2028 tax year |
|---|---|---|
| Up to 15 days late | No penalty | No penalty |
| 16 to 30 days late | 3% of the tax owed at day 15 (no penalty if it is your first year) | 4% of the tax owed at day 15 (no penalty if it is your first year) |
| 31 days or more late | 3% of the tax owed at day 15, plus a further 3% of the tax owed at day 30, plus an annual rate of 10% charged daily on the outstanding amount from day 31 until it is paid, for up to 2 years | 4% of the tax owed at day 15, plus a further 4% of the tax owed at day 30, plus an annual rate of 10% charged daily on the outstanding amount from day 31 until it is paid, for up to 2 years |
Late payment penalties apply to a balancing payment left unpaid at the due date, or amounts due after an amendment or assessment. It does not apply to payments on account. In your first year of the new penalties you have 30 days from the due date to pay in full or set up a payment plan before penalties start. After your first year this drops to 15 days, and you only ever get the 30-day period once.
Interest is on top. Late payment interest is charged separately, from the first day your payment is late until you pay in full. HMRC has not changed how late payment interest works — so the 10% figure above is a penalty, not the interest.
| Wave | First penalty-bearing update | First return under new penalties |
|---|---|---|
| First wave — over £50,000, from 6 April 2026 | 7 August 2027 — the first quarterly update for 2027 to 2028; every 2026 to 2027 update is penalty-free | 2026 to 2027 tax return, due 31 January 2028 |
| Second wave — over £30,000, from 6 April 2027 | 7 August 2027 — the first quarterly update for 2027 to 2028, which is after 2026 to 2027, so points apply from the start | 2027 to 2028 tax return, due 31 January 2029 |
| Third wave — over £20,000, from 6 April 2028 | 7 August 2028 — the first quarterly update for 2028 to 2029, with points applying from the start | 2028 to 2029 tax return, due 31 January 2030 |
Derived from HMRC's rule that the new penalties apply from the tax year you join, that 2026/27 quarterly updates carry no points, and the fixed 7 August / 7 November / 7 February / 7 May quarterly deadlines. It is why a first-wave sole trader can miss all four of their first-year updates without a fine — a fact worth knowing before you pay for software sold on penalty fear.
| Non-resident company return | Submitted on behalf of the company. Current late submission and late payment penalties still apply. |
| Trust or estate return | Submitted by a trustee. Current penalties still apply. |
| Partnership return | Submitted by a nominated partner. Current penalties still apply. |
The new penalties replace the current ones only from the tax year you join MTD. Your earlier tax returns keep the old £100-and-daily penalties — so a first-wave joiner's 2025/26 return, due 31 January 2027, is still under the current regime.
The worked example that reframes the fear
You are a sole trader turning over £70,000, so you join MTD on 6 April 2026. You are busy, and you miss every one of your four quarterly updates for 2026/27.
Your penalty is £0. Quarterly updates for the 2026/27 tax year carry no penalty points, so missing all four costs nothing in fines — though you still have to send them before you can file. The first update that can cost you a point is 7 August 2027. What you must not miss is the payment: your 2026/27 tax is still due on 31 January 2028, and late payment penalties apply from your first year (with a 30-day grace). The lesson MTD software adverts rarely lead with: in year one, the deadline that bites is the one you already had.
Where the penalties actually come from: missed deadlines
Every penalty above is triggered by a date you did not hit. The cheapest insurance is knowing the dates and keeping the records that let you file on the day — a spreadsheet you already understand plus bridging software to submit. 17 recognised products will do the submitting for free.
An accountant or bookkeeper? Penalty points are per client and per deadline, and they expire on a rolling 24-month clock. The MTD Practice Tracker keeps every client's updates and returns on one board so no deadline — and no point — slips past you. £39 one-time.
Just doing your own? The four record-keeping spreadsheets — £19 keep your income and expenses in the shape a quarterly update needs, so filing on time is a five-minute job rather than a scramble.
Common questions
How do the late submission penalties work?
They are points based. One point per quarterly update (for tax years after 2026 to 2027) or tax return filed late. At 4 points you get a £200 penalty, then a further £200 for each later missed deadline. You only ever get one point per deadline, even with more than one business.
Are there penalties for missing a 2026/27 quarterly update?
No. HMRC states there are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. You must still keep digital records and send the updates before you can file your return, but a missed 2026/27 update carries no point. The first update that can carry one is the first update for 2027 to 2028, due 7 August 2027.
What are the late payment penalties?
For 2026/27: 3% of the unpaid tax at day 15, a further 3% at day 30, plus a 10% annual rate charged daily on the outstanding amount from day 31 for up to 2 years. For 2027/28 both percentages rise to 4%. A 30-day grace period applies in your first year of the new penalties, dropping to 15 days after.
When do the penalties actually start for me?
Join in April 2026 (over £50,000): 2026/27 updates are penalty-free, the first point-bearing update is 7 August 2027, and your first new-penalty return is 2026/27 due 31 January 2028. Join in April 2027 (over £30,000): points from your first update on 7 August 2027, return due 31 January 2029. Join in April 2028 (over £20,000): points from 7 August 2028, return due 31 January 2030.
Do the penalties apply to a trust or partnership return?
No. The new penalties do not apply to a non-resident company return, a trust or estate return, or a partnership return. The current late submission and late payment penalties continue for those.
Use these figures
If you are writing about MTD penalties and want the numbers or the onset table, take them. Published under CC BY 4.0 — use it commercially, just credit the source so your readers can check the working.
Machine-readable: /mtd-penalties/data.json — the points rules, the late payment schedule by tax year, the per-wave onset table, the method and the caveats.
Citation: “Under Making Tax Digital for Income Tax, late submission penalties are points-based: one point per missed quarterly update (for tax years after 2026 to 2027) or tax return, with a £200 penalty at 4 points. Late payment penalties charge 3% of the unpaid tax at day 15 and again at day 30 for 2026/27 (4% for 2027/28), plus a 10% annual rate from day 31. Quarterly updates for the 2026/27 tax year carry no penalties.” — Fableworks HQ, compiled from HMRC guidance, 15 August 2026.
We would rather you quoted it accurately than not at all. HMRC updates its guidance; if a figure here has aged, HMRC's page is the live answer.
Keep going
Am I in MTD? · What counts as qualifying income · What goes in a quarterly update · Every MTD deadline · The penalties nobody has been fined under yet
Figures read from HMRC's Penalties for Making Tax Digital for Income Tax, and mandation dates from Find out if and when you need to use Making Tax Digital for Income Tax, both read 15 August 2026. HMRC's guidance is the live answer if you are reading this long after that date.