Penalties for Making Tax Digital for Income Tax

Changes to penalties 

If you’re using Making Tax Digital for Income Tax, new penalties will replace the current late submission and late payment penalties that apply to your personal tax return.  

The new penalties will not apply to the following Self Assessment tax returns:

• non-resident company (submitted on behalf of the company)  
• trust or estate (submitted by a trustee)  
• partnership (submitted by a nominated partner)

Current late payment and late submission penalties will still apply to these tax returns.

There are no changes to how late payment interest works. 

When the new penalties will apply to you 

Changes to late submission penalties and late payment penalties will apply to you from the tax year you join Making Tax Digital for Income Tax. 

You can find out if and when you need to use Making Tax Digital for Income Tax. 

The current penalties will still apply to previous tax years. For example, if you use Making Tax Digital for Income Tax from 6 April 2026, current penalties will apply to your 2025 to 2026 tax return deadline of 31 January 2027.

Deadlines for payments and submissions 

The new penalties apply if you miss the deadlines for sending your quarterly updates, submitting your tax return or payments.

The deadline to submit your tax return and pay any tax you owe is 31 January after the end of the tax year.

Quarterly updates for the 2026 to 2027 tax year  

You still need to keep digital records and send quarterly updates before you can submit your tax return.

The quarterly update deadlines are: 

• 7 August 
• 7 November 
• 7 February  
• 7 May 

Late submission penalties 

The new late submission penalties are points based. 

For each quarterly update (for tax years after 2026 to 2027) or tax return deadline you miss, you’ll get a penalty point.

The penalty point threshold is 4 points. If you reach this, you’ll get a:

• £200 penalty
• £200 penalty each time you miss another submission deadline

You can only get one penalty point per deadline. This applies even if you have more than one business and send more than one quarterly update late (for tax years after 2026 to 2027).

Late payment penalties 

The new late payment penalties are more proportionate to how long it takes you to pay what you owe.    

Late payment penalties apply to payments not paid in full, by the relevant due date. This includes: 

• a balancing payment for an outstanding amount on your tax bill 
• amounts due following an amendment or assessment on your tax return 

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

If you get a late payment penalty, the penalty amount depends on how long it takes you to pay what you owe. The sooner you pay your overdue amount, the lower the penalty amount will be. 

These penalties are not points based and will apply to each late payment. 

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

When late payment penalties apply 

In your first year of new penalties, you have 30 days from the payment due date to either:

• make full payment 
• contact HMRC to set up a payment plan 

After 30 days, we’ll start to apply penalties. After your first year, this reduces to 15 days.  

You will only receive the 30-day period once — if you have volunteered and are now required to use Making Tax Digital for Income Tax, you will continue to have 15 days.

The following table shows how late payment penalties will apply, depending on the tax year the payment is for.

	Penalties for 2026 to 2027 tax year	Penalties for 2027 to 2028 tax year
Payment up to 15 days late	No penalty	No penalty
Payment 16 to 30 days late	3% of the tax owed at day 15, or no penalty if it’s your first year	4% of the tax owed at day 15, or no penalty if it’s your first year
Payment 31 days or more late	3% of the tax owed at day 15, and 3% of the tax owed at day 30 Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to 2 years	4% of the tax owed at day 15, and 3% of the tax owed at day 30 Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to 2 years

If you cannot pay on time 

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

You can avoid penalties by contacting HMRC as soon as possible to discuss whether you can set up a payment plan and pay by instalments. 

If a payment plan is agreed and you make the payments, penalties will be paused from the date you contacted us.  

You may be charged a penalty if: 

• a payment plan cannot be agreed  
• you do not follow the agreed plan  

Removing penalty points and penalties  

If you’re below the 4-point threshold, we’ll automatically remove each point 24 months after the missed deadline.

If you reach the 4-point threshold, individual points will not automatically be removed. Instead, you will need to meet 2 conditions to remove all your penalty points.   

To remove all your penalty points you need to:  

• send your quarterly updates and submit your tax return on time for 12 months  
• send any outstanding quarterly updates and submit any outstanding tax returns for the previous 24 months

 You can sign in to your HMRC online services account to see the date your points will be removed.  

In some exceptional circumstances, such as insolvency, HMRC may cancel a penalty or penalty point, or remove all penalty points. 

Making an appeal 

We will send you a letter if you get a: 

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

If you do not agree with the penalty point or penalty you can appeal. Your letter will tell you how to do this. 

If you become exempt 

If your circumstances change, you may become exempt from Making Tax Digital for Income Tax.  

If you become exempt in the 2026 to 2027 tax year you will return to the current late payment and late submission penalties for Self Assessment. 

If you become exempt in the 2027 to 2028 tax year: 

• you will remain under the new penalties — from April 2027, the new penalties will apply to everyone who submits a personal Self Assessment tax return  
• your penalty point threshold will decrease from 4 points to 2 points

If you already have penalty points

If you already have penalty points when your point threshold changes from 4 to 2, your points will reduce so that you are no closer to your new threshold.  

For example, if you have 3 penalty points, you are 1 point away from your 4-point threshold. If you then become exempt, your points would reduce to 1. This means you’re still 1 point away from the 2-point threshold.