MTD Penalties Are Coming – Here’s What You Need to Know
With Making Tax Digital for Income Tax (MTD IT) on the horizon, HMRC is tightening the rules—and yes, that includes a brand new penalty system. It’s clearer, stricter, and a lot more time-sensitive than what most of us are used to.
🚨 Who’s in the MTD Spotlight?
Starting April 2026, if you’re self-employed or a landlord earning over £50,000, MTD IT becomes mandatory for you. By April 2027, that threshold drops to £30,000.
Plenty of folks are already testing the waters in HMRC’s public beta programme. While they’re getting a bit of leeway (especially with filing deadlines), one thing is crystal clear: late payments = penalties from day one.
🕐 How the Late Submission Penalty System Works
HMRC now uses a points-based system—kind of like driving, but less fun.
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1 point per missed submission
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Hit a certain number of points, and it’s a £200 fine
Thresholds for triggering a fine:
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Quarterly filers – 4 points
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Annual filers – 2 points
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Monthly filers – 5 points
Your points disappear after 2 years, but only if you stay on track and file everything on time for 12 months straight. Miss that mark, and the slate won’t be wiped clean.
Important: VAT and Income Tax points are tracked separately. Miss both? That’s two separate £200 fines. Ouch.
💸 Late Payment Penalties – A Sliding Scale
HMRC is also rolling out a tougher system for late payments:
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Days 1–15: No penalty if you pay up or arrange a Time to Pay
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Days 16–30: You’ll face a 3% penalty
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Day 31+: Another 3%, plus daily penalties at 10% per year
And from Day 1, HMRC will charge interest at the Bank of England base rate + 2.5%. It adds up fast—especially on larger tax bills.
😅 Can You Avoid or Appeal Penalties?
Yes, but speed is key.
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Can’t pay on time? Call HMRC before day 15 to set up a Time to Pay plan and stop penalties in their tracks (interest still applies).
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Got a valid excuse (illness, bereavement, tech glitch)? You can appeal via HMRC’s internal review, and if needed, the First Tier Tax Tribunal.
Top tip: Always keep evidence. Screenshots, emails, GP notes—anything that backs your case.
1. Quarterly Updates
You must submit a summary of income and expenses every quarter.
Deadlines for each quarter:
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Q1 (6 April – 5 July) → Due 5 August
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Q2 (6 July – 5 October) → Due 5 November
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Q3 (6 October – 5 January) → Due 5 February
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Q4 (6 January – 5 April) → Due 5 May
These are not full tax returns, just updates.
2. End of Period Statement (EOPS)
This is submitted once a year per business or property income source to finalise your profit after adjustments (like capital allowances).
Deadline: 31 January following the end of the tax year
(Same as the current Self Assessment deadline.)
3. Final Declaration (formerly your tax return)
This is where you declare all income (including non-MTD sources like employment, dividends, etc.) and confirm your final tax bill.
Deadline: 31 January following the end of the tax year
Think of this as the replacement for the Self Assessment return.
🧠 In Summary:
| Return Type | Frequency | Deadline |
|---|---|---|
| Quarterly Updates | 4x/year | 5 Aug, 5 Nov, 5 Feb, 5 May |
| End of Period Statement (EOPS) | Annual | 31 January after the tax year |
| Final Declaration | Annual | 31 January after the tax year |
🧪 Thinking of Volunteering Early?
Getting a head start with MTD IT before it’s mandatory is a smart move. HMRC is waiving late submission penalties for volunteers until April 2026—plenty of breathing room to get used to the new system.
But don’t forget: late payment penalties still apply, even if you’re just testing the waters. From 2024 onwards, the new regime is fully in force for unpaid tax.
Need help navigating MTD or setting up a digital system that works? That’s what we’re here for. Drop us a message, and we’ll get you sorted—no points, no penalties, no stress.
— Your MAF Team 🧠💼