Making Tax Digital · Penalties

MTD penalty points explained

Under Making Tax Digital, late quarterly updates don't bring an instant fine — they bring points. Collect enough and it costs £200. Here's exactly how the system works, and why the first year is gentler than you'd expect.

One point per late update

Making Tax Digital for Income Tax replaces one annual tax return with four quarterly updates and a final declaration. Miss the deadline for a quarterly update and you don't get fined straight away — you get a single penalty point. It works a bit like points on a driving licence: one slip is a warning; a habit is what costs you.

You only ever get one point per missed deadline, even if you run more than one business or also let out a property. The points sit against you, not against each separate income source.

What happens at each level

Points	What it means
0 points	You're on time. Nothing owed, nothing to worry about.
1–3 points	A point for each late update. Still no fine — these are warnings.
4 points	A £200 penalty is charged.
5+ points	Another £200 for every further late update while you stay at the threshold.

The threshold for quarterly filers is 4 points. Reach it and HMRC charges a flat £200, then another £200 for each further late submission while you remain at the threshold.

The first year is lenient — use it to build the habit

For the 2026/27 tax year, HMRC will not charge penalty points for late quarterly updates from the first mandated group (sole traders and landlords with income over £50,000). It's a deliberate soft landing while everyone learns the new routine. The catch: you still have to send the updates, and the leniency does not cover the final declaration or paying your tax late. Treat the free year as practice — get into the rhythm of filing on time before the points start to count from 2027/28.

How points disappear

Points don't stay forever. As long as you're below the 4-point threshold, each point is removed automatically 24 months after the deadline you missed. So an occasional late update fixes itself in time.

Once you actually hit 4 points, that automatic clock stops. To wipe the slate clean you then have to (1) submit everything on time for a 12-month period of compliance, and (2) make sure every outstanding update and return from the previous 24 months has been filed. Until both are done, the points — and the risk of more £200 charges — stay.

Late payment is a separate, harsher system

Penalty points are only about late submissions. Paying your tax late has its own charges that the 2026/27 leniency does not touch: interest from day one, then a percentage of the unpaid tax at 15 and 30 days, and an annual charge on top while it stays unpaid. If money is tight, contact HMRC about a Time to Pay arrangement before the deadline.

Staying at zero points

1
Keep records as you go. A connected bank feed and a few minutes a fortnight means each quarterly update is a review-and-tap, not a panic.
2
Diarise all five dates now: 7 August, 7 November, 7 February, 7 May, and the 31 January final declaration.
3
Submit a little early. The deadline is the latest you can file, not a target — beating it by a few days removes the risk entirely.
4
Use the free 2026/27 year to practise, so on-time filing is already a habit when points start counting in 2027/28.
5
Let your software watch the calendar for you — Get Sorted shows your live points and nudges you before every deadline.

Stay at zero points, automatically

Get Sorted tracks your penalty points, reminds you before every quarterly deadline, and submits to HMRC in a tap — so on-time becomes the default, not the scramble.

Try Get Sorted free →

HMRC sources

gov.uk — Penalties for Making Tax Digital for Income Tax gov.uk — Use Making Tax Digital for Income Tax

Always verify current thresholds and rates directly with HMRC or a qualified accountant.