MTD for Income Tax Penalties (2026/27)
MTD for Income Tax penalties in 2026/27: no points for late quarterly updates this year, the 4-point £200 regime after it, late payment penalties and interest.
Making Tax Digital for Income Tax started on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. It brings a new points-based penalty for late submissions and a new late payment penalty. In 2026/27 there are no points for late quarterly updates, but the tax return and payments are covered from day one. This guide follows HMRC's own guidance, linked below.
Late submission: points
| Rule | Detail |
|---|---|
| A point | One per missed deadline (quarterly update from 2027 to 2028; tax return from 2026/27); one per deadline even with several businesses |
| Threshold | 4 points in MTD; 2 for annual filers from April 2027 |
| Penalty | £200 at the threshold, then £200 for each further miss |
| Expiry below threshold | 24 months after the missed deadline |
| Reset at threshold | 12 months of on-time submissions and nothing outstanding for the previous 24 months |
| VAT | MTD for Income Tax points are separate from VAT points |
Late payment: penalties
| Payment | 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 tax owed at day 15 (none in your first year) | 4% of tax owed at day 15 (none in your first year) |
| 31 days or more late | 3% at day 15 + 3% at day 30 + 10% a year, daily, from day 31 (up to 2 years) | 4% at day 15 + 4% at day 30 + 10% a year, daily, from day 31 (up to 2 years) |
From HMRC's table. Payments on account are not covered. In your first year of the new penalties you have 30 days to pay in full or set up a payment plan before penalties start; after that year it is 15 days.
Worked example (2026 to 2027 rules). £10,000 of balancing payment paid 45 days late, with nothing paid in between: £300 at day 15, £300 at day 30 and about £41 of daily penalty for days 31 to 45, so about £641 in penalties. Late payment interest is extra: at the 7.75% rate HMRC lists from 9 January 2026, about £96 over 45 days. The rate at your due date will depend on Bank Rate then.
Who is in, and when
| Qualifying income over | In the tax year | Mandatory from |
|---|---|---|
| £50,000 | 2024-25 | 6 April 2026 |
| £30,000 | 2025-26 | 6 April 2027 |
| £20,000 | 2026-27 and later | 6 April 2028 |
Quarterly update periods and deadlines
| Update | Standard period | Calendar period | Deadline |
|---|---|---|---|
| 1 | 6 Apr - 5 Jul | 1 Apr - 30 Jun | 7 August |
| 2 | 6 Apr - 5 Oct | 1 Apr - 30 Sep | 7 November |
| 3 | 6 Apr - 5 Jan | 1 Apr - 31 Dec | 7 February |
| 4 | 6 Apr - 5 Apr | 1 Apr - 31 Mar | 7 May |
| Tax return | The whole tax year | 31 January | |
Periods are cumulative: each update covers the year to date, so you can correct earlier figures without resending old updates. You can send an update up to 10 days before the period ends if you expect no further transactions. Software choice is covered in our MTD software guide.
Frequently asked questions
Who has to use MTD for Income Tax, and from when?
Sole traders and landlords registered for Self Assessment whose qualifying income is over £50,000 for 2024-25 must use it from 6 April 2026; over £30,000 for 2025-26, from 6 April 2027; over £20,000 for 2026-27, from 6 April 2028. Qualifying income is gross self-employment and property income before expenses, taken from your tax return. Employment income, a partnership profit share, dividends and pensions do not count. Partnerships will join later on a timetable HMRC has not yet set.
How do late submission penalty points work?
You get one point for each missed deadline - a quarterly update (for tax years after 2026 to 2027) or the tax return - and only one point per deadline even if you have several businesses. At 4 points you get a £200 penalty, and another £200 each time you miss a further deadline. Points for MTD for Income Tax are separate from any VAT points. The penalty is a flat amount and does not depend on the tax owed. The statute is Finance Act 2021 Schedule 24.
Are there penalties for late quarterly updates in 2026/27?
No. HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. You still have to keep digital records and send all four quarterly updates before you can submit the tax return, and penalty points do still apply if the 2026 to 2027 tax return itself is late. From 2027 to 2028, late quarterly updates attract points.
What are the quarterly update deadlines?
Each update is cumulative from the start of the tax year. Standard periods: 6 April to 5 July (due 7 August), 6 April to 5 October (7 November), 6 April to 5 January (7 February) and 6 April to 5 April (7 May after the tax year). If your accounting period runs 1 April to 31 March you can choose calendar periods ending 30 June, 30 September, 31 December and 31 March, with the same deadlines; you must choose in your software before the first update and cannot change for that year after sending one. The tax return is due by 31 January after the tax year.
How do late payment penalties work?
They apply to a balancing payment and to tax due after an amendment or assessment, but not to payments on account. For the 2026 to 2027 tax year: no penalty up to 15 days late; 3% of the tax owed at day 15 if 16 to 30 days late (none in your first year of the new penalties); and if 31 or more days late, 3% at day 15 plus 3% at day 30, plus 10% a year on the outstanding amount, charged daily from day 31 until paid or for up to 2 years. For 2027 to 2028 the two percentages are 4%. Agreeing a payment plan pauses penalties from the date you contacted HMRC. Late payment interest is charged separately from the day after the due date. The statute is Finance Act 2021 Schedule 26.
How do I get rid of penalty points?
Below the threshold, each point is removed automatically 24 months after the missed deadline. Once you reach 4 points, they are only cleared when you have both sent your quarterly updates and tax return on time for 12 months and sent any outstanding updates and returns for the previous 24 months. HMRC may cancel points or penalties in exceptional circumstances such as insolvency.
Can I appeal a penalty point or penalty?
Yes. HMRC writes to you when you get a point, a £200 penalty or a late payment penalty, and the letter says how to appeal. No point or penalty arises if you satisfy HMRC, or on appeal the tribunal, that you had a reasonable excuse (Finance Act 2021 Schedule 24 paragraph 19 and Schedule 26 paragraph 12). The statute says lack of money is not a reasonable excuse unless caused by events outside your control, and relying on someone else, such as an agent, is not one unless you took reasonable care to avoid the failure.
What is late payment interest and what rate applies?
Interest runs from the day after the due date until you pay, on top of any penalty. It is Bank Rate plus 4% (since 6 April 2025), which HMRC lists as 7.75% from 9 January 2026. If HMRC owes you money, repayment interest is Bank Rate minus 1%, with a floor of 0.5%. Late payment interest is charged under Finance Act 2009 s.101.
What records do I have to keep digitally?
Digital records of your self-employment and property income and expenses, each recorded with the amount, the date and the category, created and stored in compatible software. If you use more than one product the records must be digitally linked; HMRC says you must not move a record by copying it out or by cut and paste once it has been sent in a quarterly update. You still keep supporting documents such as bank statements and invoices, and must keep the digital records for at least 5 years after the submission deadline - for 2026 to 2027, until at least 31 January 2033.
Can I stop using MTD if my income falls?
Not straight away. You can opt out if you amend the previous year's return so that qualifying income falls below the relevant threshold, or if your qualifying income has been below the threshold for 3 consecutive years; HMRC uses the fourth quarterly update of the third year for that check. You can also stay in voluntarily. If HMRC accepts that you are exempt - for example because you are digitally excluded - you stop keeping digital records and sending updates but still file a Self Assessment return.
Do the new penalties apply to people not in MTD?
From April 2027 the new penalties apply to everyone who submits a personal Self Assessment return, per HMRC. For annual filers the points threshold is 2. If you are in MTD and become exempt in 2027 to 2028, your threshold drops from 4 to 2 and any points are reduced so that you are no closer to it. If you become exempt in 2026 to 2027 you return to the old Self Assessment penalties. The new penalties do not apply to partnership, trust and estate, or non-resident company returns.