MTD penalties: what happens if you miss a deadline?

In short: MTD penalties include late-submission points and late-payment charges. Four late-submission points trigger a £200 penalty, then further £200 penalties can follow, but late quarterly updates in 2026-27 do not get points; late final declarations still can. Late payment penalties are calculated separately on unpaid tax (GOV.UK).

How do MTD late-submission penalties work?

MTD late-submission penalties work through points: one point for each missed deadline, with a £200 penalty when you reach four points. Under Making Tax Digital, you get a maximum of one point per missed deadline even if you have several businesses.

These rules are separate from late-payment penalties. They apply to filing obligations, not the amount of tax due.

Is there a grace period in the first year?

There is a first-year grace period for late quarterly updates in 2026-27, because no late-submission points apply to late quarterly updates in that year. The grace period does not protect a late final declaration, which can still attract points if late.

This means the first MTD year is not penalty-free overall. It removes points for late quarterly updates only, while keeping the final declaration within the points system.

What are the late-payment penalties?

Late-payment penalties charge a percentage of unpaid tax, and the rates step up after the 2026-27 tax year. GOV.UK sets out both the first-year rates and the higher rates from 2027-28 (GOV.UK).

The final declaration is due by 31 January after the tax year ends, and tax payment deadlines are unchanged. For the reporting timetable, see MTD quarterly updates: dates, deadlines and what to send.

How do you avoid MTD penalties?

You avoid MTD penalties by keeping digital records up to date, reviewing each cumulative update before its deadline, and submitting the final declaration by 31 January. Practical steps:

• Keep each self-employment and property business separate in your records.
• Review totals before the quarterly deadline rather than waiting until the day.
• Correct earlier mistakes in the next cumulative update.
• Track the final declaration separately from the four quarterly updates.
• Pay tax by the unchanged payment deadlines.

If you are unsure whether you are in scope, start with who has to use MTD for Income Tax.

Can you appeal?

You can appeal an MTD penalty within 30 days if you have a reasonable excuse. The penalty guidance is on GOV.UK, and any appeal should be handled within HMRC's stated process.

Do not rely on an appeal as a filing plan. The safer approach is to keep records current, submit on time, and use corrections through the cumulative update process where needed.

How can Taxley help you avoid MTD penalties?

Taxley MTD handles digital records, manual entry or CSV import, cumulative quarterly updates you review before submitting, in-year tax estimates, and the final declaration. It covers self-employment and UK and foreign property income, and it is free during beta. Taxley is launching soon; visit the MTD Income Tax page for updates.

Frequently asked questions

How much is the MTD penalty for a late quarterly update?

Four late-submission points trigger a £200 penalty. After that, each further missed deadline while at the threshold can trigger another £200 penalty.

Do MTD penalty points expire?

Yes. If you are below the threshold, points expire after 24 months of compliance. At the threshold, you need 24 months of on-time submissions and to catch up outstanding submissions.

Are late quarterly updates penalised in 2026-27?

No late-submission points apply to late quarterly updates in 2026-27. A late final declaration can still attract points.

Are late-payment penalties the same from 2027-28?

No. For 2026-27 the day 15 and day 30 rates are 3% and 3%. From 2027-28 they rise to 4% and 4%, with 10% per annum from day 31 in both phases.