MTD penalties: how the points system actually works
MTD has two separate penalty systems — one for filing late and one for paying late. Both are gentler than most people fear, but it pays to understand how they bite.
Late submission: a points system
You do not get fined the first time you are late. Instead you collect points:
- Each missed quarterly update or final-declaration deadline gives you one penalty point.
- When you reach 4 points you get a £200 penalty — and another £200 for every later deadline you then miss.
- Below that threshold, each point is automatically removed 24 months after the deadline you missed.
- Once you have hit 4 points, clearing them is harder: you must file everything on time for 12 months and have submitted all outstanding updates and returns for the previous 24 months.
HMRC has said there are no penalties for missing a quarterly update deadline in the very first year, 2026/27. The final declaration and paying your tax on time are not covered by that concession, and concessions can change — so treat it as breathing room, not a reason to skip updates. Confirm the current position on gov.uk.
Late payment: a percentage that grows
Paying your tax bill late is penalised separately, and the amount depends on how many days overdue you are. For 2026/27 the structure is:
| How late the payment is | Penalty |
|---|---|
| Up to 15 days | No late-payment penalty |
| Day 16–30 | 3% of the tax still outstanding at day 15 |
| Day 31 onwards | the 3% above, plus a further 3% of what is outstanding at day 30, plus 10% per year charged daily on the balance from day 31 |
From 2027–28 onward the two 3% charges rise to 4% each; the 10%-per-year element is unchanged. Interest is also charged on overdue tax on top of these penalties.
Send every update, even a nil one, and pay on time. Do those two things and the penalty rules never touch you. The points system is designed to forgive the occasional slip and only bite persistent non-compliance.
Sources: HMRC 'Penalties for Making Tax Digital for Income Tax' guidance on gov.uk, plus professional-body summaries. General information, not tax advice — confirm exact figures and concessions with HMRC.
General information, not tax or financial advice. Always confirm your own position with HMRC or a qualified adviser. This article was last checked against published gov.uk guidance on 13 July 2026. Rules and figures can change — always confirm your own position with HMRC or a qualified adviser.