HMRC penalty points: the points-based regime for late returns

HMRC’s penalty points regime gives you one point each time you miss a return deadline, and charges a £200 penalty only when your points reach a threshold. It already applies to VAT and to Making Tax Digital for Income Tax. From April 2027 it covers everyone who files a personal Self Assessment return, replacing the £100 fixed penalty for those taxpayers.

How does the points system work?

You get one point for each missed deadline, not a fine. When your points reach the threshold for how often you file, HMRC charges £200, and another £200 for each later missed deadline while you stay at the threshold.

HMRC’s MTD for Income Tax penalties guidance, updated 30 March 2026, says you get one point per deadline. MTD points are kept separately from VAT points, so a late VAT return does not count towards your Income Tax threshold.

What are the thresholds?

The threshold depends on how often you file. These figures come from HMRC’s VAT and Income Tax guidance.

For quarterly MTD for Income Tax, the 4-point threshold counts quarterly updates and the tax return together. For annual Self Assessment filers, such as MTD volunteers, HMRC’s volunteers guidance sets the threshold at 2 points.

Who does it apply to, and from when?

The points regime is being rolled out tax by tax:

• VAT: return periods starting on or after 1 January 2023.
• MTD for Income Tax: from 6 April 2026, for sole traders and landlords required to join.
• All personal Self Assessment returns: from April 2027, under the Budget 2025 announcement.

The Budget 2025 overview of tax legislation says the regime will apply to individual Self Assessment taxpayers not mandated into MTD from 6 April 2027. Returns for 2025 to 2026 and 2026 to 2027 still use the current £100, daily and percentage penalties. Our guide to Self Assessment late filing penalties sets out that timeline.

Are there any easements for MTD quarterly updates?

Yes, two. HMRC does not give points for missed quarterly update deadlines in 2026 to 2027. The deadlines are 7 August, 7 November, 7 February and 7 May.

Budget 2026, on 28 October 2026, extended the relief to the next wave. The Budget 2026 overview says the government “will not apply late submission penalty points to quarterly updates for the 2027-28 tax year” for people required to join in April 2027.

Both easements cover quarterly updates only. You still need to send every update before you can file your tax return, and a late return still gets a point. Our guide to missed MTD quarterly updates explains what to do.

How do points expire?

Below the threshold, each point expires on its own 24 months after the missed deadline. HMRC’s VAT points guidance adds that a point from a deadline that was not the last day of a month expires at the end of the month 24 months later.

At the threshold, points stop expiring one by one. To reset them to zero you must:

1. file on time for the full period of compliance (for example 12 months for quarterly filers), and
2. send any outstanding returns from the previous 24 months.

For annual filers, the period means your next 2 tax returns on time.

How are late payments penalised?

Late payment does not earn points. It has its own percentage penalties, plus interest from the first day the tax is late.

In your first year under the new penalties you get 30 days, not 15, before the first penalty. VAT uses the same 3%, 3% and 10% structure today. Budget 2025 said penalties at day 15 and day 30 will rise to 4% from April 2027 under a heading covering Self Assessment and VAT. HMRC’s VAT guidance had not been updated to show this when we checked on 6 November 2026.

Which applies to you?

• If you are VAT registered, points apply now. See our guide to VAT penalties and surcharges.
• If you joined MTD for Income Tax in April 2026, quarterly updates carry no points this year, but your 2026 to 2027 return does.
• If you join MTD in April 2027, your 2027 to 2028 quarterly updates carry no points.
• If you file an ordinary Self Assessment return, points start with the 2027 to 2028 tax year.

What advisers should do

1. Diarise every client deadline by tax, because VAT and Income Tax points are counted separately.
2. Check points in each client’s online account at least quarterly, and warn clients near the threshold.
3. For penalties you disagree with, see our guide on how to appeal an HMRC penalty, and our MTD for Income Tax penalties explainer.

Frequently asked questions

How many penalty points before HMRC charges a fine?

It depends on how often you file: 2 points for annual returns, 4 for quarterly and 5 for monthly VAT returns. You pay £200 when you reach the threshold.

Do penalty points cost money on their own?

No. A point is a record of a missed deadline. You only pay the £200 penalty once your points reach the threshold.

When do penalty points expire?

Below the threshold, a point expires 24 months after the missed deadline. At the threshold, you must complete a period of on-time filing and send any outstanding returns to clear them.

Will I get points for a late MTD quarterly update in 2026 to 2027?

No. HMRC does not give points for missed quarterly updates in 2026 to 2027, but you must still send them before filing your tax return.

Does the points system apply to my January 2027 tax return?

No. The 2025 to 2026 return due on 31 January 2027 uses the current £100 penalty and later charges. Points apply to ordinary Self Assessment from 2027 to 2028.