MTD for Income Tax penalties: how late submission points work

MTD for Income Tax uses a points system for late filing. You get one penalty point each time you miss a quarterly update or tax return deadline, and a £200 penalty once you reach four points. People joining in April 2027 will not get points for late quarterly updates in their first year, 2027-28.

How do late submission points work?

Each missed deadline adds one point. HMRC’s penalties guidance, last updated 30 March 2026, sets the rules:

• one point for each missed quarterly update deadline or tax return deadline
• a £200 penalty when you reach four points
• a further £200 for every deadline you miss while at four points
• only one point per deadline, even if you have several businesses and several updates are late
• MTD Income Tax points are kept separate from any VAT penalty points

A typical year has four quarterly deadlines (7 August, 7 November, 7 February and 7 May) and a tax return deadline of 31 January. See MTD quarterly deadlines.

When do points start?

Points for quarterly updates start later than many people expect. Here is how each group is treated:

The 2027-28 easement for April 2027 joiners comes from Budget 2026. The Budget 2026 overview of tax legislation says the government “will not apply late submission penalty points to quarterly updates for the 2027-28 tax year” for this group. Quarterly updates must still be sent before you can file your return.

HMRC’s penalties page, updated before the Budget, does not yet mention this easement. Expect it to be updated.

How do you get rid of points?

Points disappear in one of two ways, depending on whether you have hit the threshold.

Below four points. Each point expires automatically 24 months after the deadline you missed.

At four points. Points do not expire on their own. To clear them all, you must:

1. Submit every quarterly update and tax return on time for 12 months.
2. Send any outstanding updates and returns from the previous 24 months.

In exceptional cases, such as insolvency, HMRC may cancel points or penalties.

What are the late payment penalties?

Late payment penalties apply to balancing payments and to tax due after an amendment or assessment. They do not apply to payments on account. Late payment interest runs from the first day the tax is late, on top of any penalty.

The first percentage is charged at day 15 and the second at day 30. From day 31, a charge at an annual rate of 10% runs daily on the unpaid amount, until the tax is paid or for up to two years.

In your first year under the new penalties you get 30 days, not 15, before the first late payment penalty. Volunteers who later become required to use MTD keep the 15-day period.

Can a payment plan stop penalties?

Yes. If you contact HMRC and agree a payment plan, penalties are paused from the date you got in touch, as long as you keep to the plan. Call early. Our HMRC Self Assessment helpline guide lists the payment problems line.

Penalties if you are not in MTD

From April 2027 the points system reaches beyond MTD users. HMRC’s guidance says “from April 2027, the new penalties will apply to everyone who submits a personal Self Assessment tax return.”

If you become exempt from MTD during 2027-28, you stay under the new penalties but your threshold falls from four points to two. Your existing points are reduced so you are no closer to the new threshold; three points would become one. See who is exempt from MTD.

Which applies to you?

• If you joined in April 2026 and miss an update this year, send it as soon as you can. No points apply in 2026-27. See missed an MTD quarterly update.
• If you join in April 2027, late updates in 2027-28 carry no points, but your 2027-28 return due by 31 January 2029 does.
• If you are not in MTD, from April 2027 a late return earns points under the new system.
• If you cannot pay, agree a payment plan before day 15 to pause penalties.

What to do now

1. Diarise every deadline in your software and calendar.
2. Send late updates anyway. You cannot file your return until all four are in.
3. Read every HMRC letter. HMRC writes about every point and penalty, and each letter explains how to appeal.
4. Budget for tax. Use the self-employed take-home calculator to estimate your bill.

Frequently asked questions

How many points before an MTD penalty?

Four. When you reach four points you get a £200 penalty, and another £200 for each further missed deadline while you stay at the threshold.

Are there penalties for late MTD quarterly updates in 2026-27?

No. HMRC does not apply penalty points to late quarterly updates in 2026-27. Late tax returns and late payments still carry penalties.

Will April 2027 joiners get points for late quarterly updates?

Not in 2027-28. Budget 2026 confirmed no late submission points for quarterly updates that year, though updates must still be sent before the tax return.

Do I get a point for each business if I have two?

No. You get only one point per deadline, even if updates for several businesses are late.

How long do MTD penalty points last?

Points below the threshold expire 24 months after the missed deadline. At four points you need 12 months of on-time filing, plus any outstanding submissions, to clear them.

Can I appeal an MTD penalty point?

Yes. HMRC writes to you about each point, late payment penalty and £200 penalty, and the letter explains how to appeal.