Changes to penalties

NewChanges to late submission penalties and late payment penalties will apply to you,you if you volunteer to test the Making Tax Digital for Income Tax service.service.  

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How to agree to the new penalties

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The new penalties will only apply to your personal IncomeSelf TaxAssessment Selftax Assessment.return. They will not apply to Self Assessment in any other capacity, such as being a trustee,trustee or to partnerships.

If you’re an authorised agent, you can agree to the new penalties on behalf of your clients.

When the new penalties will apply to you

We’ll only confirm the new penalties apply to you, once we’ve checked that:that: 

• you’re eligible to sign up to the service, and have completed the process
• you haveto beensign testing the service up 
• we have moved your records over to our new IT platform

If these steps are not completed in the tax year when you agree to the new penalties, we’ll continue checking in the tax years that follow.

Once all the steps are completed, we’ll send you a letter to confirm that the new penalties apply to you.you. 

The current penalties will still apply to your previous tax years. years.  

There may be some customers who are have to stop testing the service, due to specific changes in their circumstances. We’ll write to you to confirm if this applies to you. Our letter will explain how this affects penalties.

Deadlines for payments and submissions

This table shows the main deadlines for payments and submissions.submissions Theseduring arethe whattesting thephase. The new penalties will apply toif duringyou themiss testing phase.these.

	Quarterly updates	Online annual return due	Balancing payment due
Making Tax Digital for Income Tax volunteer in tax year 2024 to 2025	No penalties apply	31 January 2026	31 January 2026
Making Tax Digital for Income Tax volunteer in tax year 2025 to 2026	No penalties apply	31 January 2027	31 January 2027

Late submission penalty pointspenalties

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How late submission penalties work for volunteers 

LateWhen submissionyou penaltiesare workvolunteering, onfor a points-based system.

For each annual tax return you submit late,late you’ll get a penalty point, until you reach the penalty point threshold of 2 points.points. 

When you reach the threshold, you’ll get a £200 penalty. You’ll also get another £200 penalty if you miss the deadline for submitting any more annual tax returns, while you’re at the penalty point threshold.

Removing penalty pointspoints 

If you have not reached the penalty point threshold, after 24 months we’ll remove your individual penalty point automatically. This will happen about 24 months after you get it.automatically.  

If you have reached the threshold for penalty points, you’ll need to take action to reset them to zero. You can do this by completing a period of compliance.compliance. 

A period of compliance is when you submit all your obligations on time. If you volunteer for Making Tax Digital for Income Tax, you’ll need to complete a 2424-month month period of compliance. This means you must submit your next 2 annual obligationstax returns on time.

During theYour testing phase, your quarterly updates will not be considered for the period of compliance.

Penalties for quarterly updates for volunteers

There are no late submission penalties for missing quarterly update deadlines while you are volunteering to use Making Tax Digital for Income Tax.

If you stop volunteering  

In the future, if you are required to use Making Tax Digital for Income Tax: 

• late submission penalties will apply if you miss deadlines for submitting quarterly updates 
• your penalty point threshold will increase from 2 points to 4 points 

For example, you may volunteer for the 2025 to 2026 tax year but are then required to use Making Tax Digital for Income Tax starting from 6 April 2026. From 6 April 2026, you will get a penalty point when you submit a quarterly update late and your penalty point threshold will increase to 4 points.

Late payment penalties

If your payment is more than 15 days overdue,late, we’ll start to apply late payment penalties to you.

The new late payment penalties are more proportionate to how long it takes you to pay what you owe. This means the longer you take to pay, the higher your penalty will be. These penalties do not use a points-based system.

Late payment penalties can apply to any Income Tax Self Assessment payments not paid in full, by the relevant due date. This could include:

• balancing payments
• amounts due following an amendment,amendment or assessment

Late payment penalties do not apply to any payments on account that you may need to make.

ForThe latesooner paymentyou penalties,pay theyour soonerlate youpayment, pay, the lower the penalty amount will be.

From the first day your payment is overdue,late, until you pay in full, we’ll charge late payment interest.

ThisThe tablefollowing showstables show how late payment penalties will apply.apply, depending on the tax year the payment is for.

Payment penalties for the 2024 to 2025 tax year

	First late payment penalty	Second late payment penalty
Payment up to 15 days overduelate	None	None
Payment between 16 and 30 days overduelate	Calculated at 2% on the tax you owe at day 15	None
Payment 31 days or more overduelate	Calculated at 2% of what was outstanding at day 15, plus 2% of what is still outstanding at day 30	CalculatedAn atannual a daily rate of 4% per year on the outstanding balance ThisCharged willdaily befrom chargedday every31, until the outstanding balance is paid in full

Payment penalties for the 2025 to 2026 tax year onwards

	First late payment penalty	Second late payment penalty
Payment up to 15 days late	None	None
Payment between 16 and 30 days late	3% on the tax you owe at day 15	None
Payment 31 days or more late	3% of what was outstanding at day 15, plus 3% of what is still outstanding at day 30	An annual rate of 10% per year on the outstanding balance Charged daily from day 31, until the outstanding balance is paid in full

If you cannot pay on time

Contact HMRC as soon as possible if you’re having difficulty paying your Income Tax by the deadline.

Making an appeal

We will send you a penalty decision letter if you get a:

• late payment penalty
• late submission penalty point
• £200 late submission penalty

The process to appeal against a decision is the same for Making Tax Digital for Income Tax and for Self Assessment. If you do not agree with our decision, check when and how to appeal against it.