MTD Penalties and Late Filing
Making Tax Digital introduces a new penalty system designed to penalise persistent non-compliance rather than occasional mistakes. There are two types of penalties: late submission penalties for missing filing deadlines, and late payment penalties for paying tax late.
This article covers late submission penalties. For payment penalties, see Late Payment Consequences.
Points-based submission penalties
Instead of an automatic fine for missing one deadline, HMRC uses penalty points. You accumulate points for late submissions, and only face a financial penalty after reaching the threshold.
For quarterly filers (landlords and self-employed on MTD), the threshold is 4 points. After that, each late submission triggers a £200 penalty.
How it works
- 1st late submission: 1 point
- 2nd late submission: 2 points total
- 3rd late submission: 3 points total
- 4th late submission: 4 points total + £200 penalty
- 5th and subsequent: £200 penalty each time
Points apply to both quarterly updates and your final declaration. Four late submissions across any combination will trigger the £200 penalty.
Points expiry and reset
Points expire automatically after 24 months from the month after the failure occurred.
Once you reach 4 points, all points reset to zero when you:
- Submit all returns on time for 12 consecutive months, AND
- Submit all outstanding returns from the previous 24 months
Both conditions must be met. If you achieve 12 months of on-time submissions but still have outstanding returns, you'll stay at the penalty threshold and continue paying £200 for further late filings.
Soft landing for 2026/27
Landlords joining MTD in 2026/27 won't receive penalty points for late quarterly updates during that first year.
What this means:
- No points for late quarterly updates in 2026/27 (Q1, Q2, Q3, Q4)
- Points still apply for late final declaration (due 31 January 2028)
- You still need to submit all quarterly updates before submitting your final declaration
The soft landing only applies to the first cohort (income over £50,000). It won't apply to landlords joining MTD from April 2027 or April 2028.
From 2027/28 onwards, late quarterly updates trigger penalty points immediately.
Quarterly update deadlines
Quarterly updates are due one month after each quarter ends:
| Quarter | Period covered | Deadline |
|---|---|---|
| Q1 | 6 April to 5 July | 7 August |
| Q2 | 6 April to 5 October | 7 November |
| Q3 | 6 April to 5 January | 7 February |
| Q4 | 6 April to 5 April | 7 May |
See MTD Deadlines and Key Dates for full details.
Final declaration deadline
Your final declaration (year-end tax return) is due 31 January following the end of the tax year. For example, your 2026/27 final declaration is due by 31 January 2028.
There's no soft landing for final declarations. Even in 2026/27, a late final declaration will trigger a penalty point.
If you've already accumulated 3 points from late quarterly updates, a late final declaration pushes you to 4 points and triggers the £200 penalty.
Late payment penalties (overview)
Late payment penalties are separate from submission penalties. HMRC operates a two-penalty system:
First penalty
- Days 1-15: No penalty
- After day 15: 2% penalty on the tax outstanding at day 15
- After day 30: Additional 2% penalty on tax still outstanding at day 30 (4% total)
Second penalty
- Day 31 onwards: Daily penalty at 4% per annum on remaining outstanding tax
Late payment interest also accrues from the due date until you pay.
If you can't pay on time, contact HMRC to arrange a Time to Pay agreement. If agreed within 15 days of the payment deadline, this stops penalties accruing (though interest continues).
For full details, see Late Payment Consequences.
Appealing penalties
You can appeal a penalty if you have a reasonable excuse for missing the deadline. Examples include bereavement, serious illness, unexpected hospital stay, or computer failure at a critical time.
Contact HMRC as soon as possible if you believe you have a reasonable excuse. If HMRC doesn't agree, you can request an internal review or appeal to the First Tier Tax Tribunal.
For more information, see HMRC's guidance on penalties for late submission.
Avoiding penalties
Build a quarterly rhythm. Most landlords find it easier to update records monthly rather than scrambling to gather three months of information at the deadline. See Record Keeping Checklist.
Submit early. Quarterly updates are cumulative, so you can submit Q2 as soon as Q1 is done. Early submission gives you time to fix any errors HMRC identifies.
If you're late, submit anyway. The points system penalises persistent non-compliance over 24 months. One or two late filings won't trigger financial penalties. Four late submissions trigger the £200 penalty, so occasional slips are absorbed without cost.