Making Tax Digital penalties explained

Last updated: 13 October 2026

In short: MTD for Income Tax uses a points system. Each late quarterly update earns a point, and at four points you get a £200 penalty, with £200 more for each late submission after that. Late payment penalties are separate and grow the longer tax stays unpaid.

Late submission points

  • One point per late quarterly update or Final Declaration
  • Threshold of four points for quarterly filers
  • £200 penalty at the threshold, then £200 per further late submission
  • Points expire after a period of compliance

HMRC has signalled a softer approach for late quarterly updates in the first year. Check GOV.UK for the current position.

Late payment penalties

If tax is still unpaid after the due date, penalties apply as a percentage of the amount owed, rising at set points, plus interest. Paying or agreeing a Time to Pay arrangement quickly keeps this down.

How to avoid penalties

Keep records weekly, set reminders for 5 August, 5 November, 5 February and 5 May, and use software that keeps your totals ready.

Frequently asked questions

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