MTD for Income Tax: what happens if you miss a deadline? (penalties explained)

Making Tax Digital for Income Tax is happening and I'm sure you’re getting used to the new quarterly update rhythm so here's the good news first, followed by what to expect once the grace period ends.

The good news: no penalties yet for 2026/27 quarterly updates

There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. So if you're late with your first or second update this year, you won't be penalised for it.

You still need to send them. Quarterly updates are how HMRC gets the information it needs before you can submit your tax return, so falling behind now just means more catching up later.

This "no penalty" grace period only applies to quarterly updates. Your tax return and payment deadlines still carry penalties as normal - more on that below.

When do penalties start applying?

The new penalty rules apply to you from the tax year you join MTD. If you joined from 6 April 2026, your 2025/26 tax return (due 31 January 2027) is still under the old penalty rules, the new points-based system kicks in for your 2026/27 quarterly updates and tax return onwards.

How the new late submission penalties work

It's a points-based system, similar to penalty points on a driving licence:

• You get 1 penalty point for each missed quarterly update or tax return deadline (quarterly update points apply from the 2027/28 tax year onwards, once the grace period ends)
• Reach 4 points and you get a £200 penalty plus another £200 each time you miss a further deadline after that
• You can only get one point per deadline, even if you have multiple income sources and miss more than one update on the same date
• If you're also VAT registered, your Income Tax penalty points are tracked completely separately from your VAT points

Points get removed automatically — each point drops off 24 months after the missed deadline, as long as you're below the 4-point threshold. If you do hit 4 points, you'll need to submit everything on time for 12 months straight, and clear any backlog from the previous 24 months, before your points reset.

What about late payment penalties?

These work differently, they're not points-based, and they apply separately to your balancing payment (not to any payments on account).

• Up to 15 days late: no penalty
• 16–30 days late: a percentage penalty based on what you owe (rates increase slightly for the 2027/28 tax year onwards)
• 31+ days late: a bigger upfront penalty, plus 10% annual interest charged daily until you pay

The sooner you pay, the lower the penalty and if you're struggling, contacting HMRC to set 

Full details are on the official HMRC penalties guidance page.

Got a specific penalty or payment question? Ask below and we'll point you in the right direction 👇