MTD for Income Tax penalties: points and late payment
When you join MTD for Income Tax, new penalties replace the old Self Assessment late filing and late payment penalties. Here is how they work, from GOV.UK.
Not tax advice. This site explains GOV.UK guidance in plain English. Your own position depends on your tax returns and circumstances. Check GOV.UK or ask an accountant before you act.
The first year: 2026 to 2027
There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. You must still send the updates before you can submit your tax return. Penalty points still apply to a late tax return, and late payment penalties still apply (GOV.UK).
The old penalties still apply to tax years before you joined. If you started on 6 April 2026, your 2025 to 2026 return due 31 January 2027 is under the old rules.
Late submission: penalty points
Each missed quarterly update deadline (for tax years after 2026 to 2027) or tax return deadline earns one penalty point. You can only get one point per deadline, even with several businesses. At 4 points you get a £200 penalty, and another £200 each time you miss another deadline.
| Missed deadlines | Points | £200 penalties so far |
|---|---|---|
| 1 | 1 | £0 |
| 2 | 2 | £0 |
| 3 | 3 | £0 |
| 4 | 4 | £200 |
| 5 | 4 | £400 |
| 6 | 4 | £600 |
VAT penalty points are kept separately from Income Tax points.
How points are removed
Below 4 points, each point expires automatically 24 months after the missed deadline. Once you reach 4, you need to do both of these to clear all points: send your updates and returns on time for 12 months, and send anything outstanding from the previous 24 months.
Late payment penalties
These apply to tax not paid in full by the due date (such as the balancing payment), but not to payments on account. Late payment interest is charged as well, from the first day.
| How late | 2026 to 2027 tax year | 2027 to 2028 tax year |
|---|---|---|
| Up to 15 days | No penalty | No penalty |
| 16 to 30 days | 3% of the tax owed at day 15, or no penalty if it is your first year | 4% of the tax owed at day 15, or no penalty if it is your first year |
| 31 days or more | 3% of the tax owed at day 15, and 3% of the tax owed at day 30, plus 10% a year on the amount outstanding, charged daily from day 31 until paid or for up to 2 years | 4% of the tax owed at day 15, and 4% of the tax owed at day 30, plus 10% a year on the amount outstanding, charged daily from day 31 until paid or for up to 2 years |
In your first year of the new penalties you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan before penalties start. After your first year that drops to 15 days. If a payment plan is agreed and you keep to it, penalties are paused from the date you contacted HMRC.
Volunteers and exemptions
If you volunteer before you have to, you will not get penalties for late quarterly updates while volunteering, but late tax returns earn points and the threshold is 2 points (GOV.UK). If you become exempt in 2027 to 2028 you stay under the new penalties (they apply to everyone filing a personal tax return from April 2027) and your threshold drops from 4 points to 2.
Appeals
HMRC writes to you for each penalty point, £200 penalty and late payment penalty. The letter explains how to appeal if you disagree.
Questions
Will I be fined for a late first quarterly update in 2026?
There are no penalty points for late 2026 to 2027 quarterly updates. You still need to send it before you can file your tax return.
How much is the MTD late submission penalty?
£200 once you reach the 4-point threshold, then £200 for each further missed deadline.
Do late payment penalties apply to payments on account?
No. GOV.UK says late payment penalties do not apply to payments on account. Late payment interest still applies.