Penalties under Making Tax Digital for Income Tax

Late submission points

A client gets one penalty point for each missed quarterly update deadline, for tax years after 2026 to 2027, and for each missed tax return deadline. At 4 points HMRC charges a £200 penalty, and a further £200 for each deadline missed while at 4 points (HMRC: penalties).

Only one point is given per deadline, even if the client has several businesses and sends several updates late.

There are no penalty points for late quarterly updates in 2026 to 2027. The agent toolkit says this was legislated following Autumn Budget 2025. A late 2026 to 2027 tax return still gets a point.

Removing points

Under 4 points, each point is removed automatically 24 months after the missed deadline. At 4 points, automatic removal stops. All points are cleared once the client has sent updates and returns on time for 12 months and sent anything outstanding from the previous 24 months (HMRC: penalties).

Section 262 of the Finance Act 2026 gives HMRC a power to cancel or reset penalty points and late submission penalties, first published in the July 2025 draft legislation.

Late payment penalties

Days late	2026 to 2027	2027 to 2028
Up to 15 days	No penalty (HMRC: penalties)	No penalty
16 to 30 days	3% of the tax owed at day 15, or none in the first year	4% of the tax owed at day 15, or none in the first year
31 days or more	3% at day 15, 3% at day 30, then 10% a year daily	4% at day 15, 4% at day 30, then 10% a year daily

How the late payment penalty works

The daily penalty from day 31 runs at an annual rate of 10% on the amount outstanding until it is paid, for up to 2 years (HMRC: penalties). In the client's first year of the new penalties, they have 30 days from the due date to pay in full or agree a payment plan before a penalty applies. After the first year this drops to 15 days.

For example, a client in their second year owes £8,000 for 2027 to 2028 and pays nothing until day 40. The first charge is 4% of the £8,000 owed at day 15, which is £320. The second is 4% of the £8,000 owed at day 30, another £320. The daily penalty then runs at 10% a year from day 31. Late payment interest is charged as well, and HMRC says interest works as before.

The 2026 to 2027 rates of 3%, 3% and 10% took effect on 1 April 2025 for VAT and Making Tax Digital for Income Tax, up from 2%, 2% and 4% (HMRC policy paper).

Clients who volunteered early

Clients who joined before they had to are under HMRC's penalties for volunteers, published on 5 April 2024 and updated on 12 March 2026. For 2024 to 2025 there was no penalty for a payment up to 30 days late. A volunteer gets a point for each late tax return, and the threshold is 2 points, with a £200 penalty at the threshold and for each further late return.

Once a volunteer's 2026 to 2027 year falls under the main rules, the main penalties guidance applies.

Points thresholds compared

Making Tax Digital for Income Tax: 4 points (HMRC: penalties).
Income Tax volunteers: 2 points for late tax returns (HMRC: penalties for volunteers).
VAT, annual returns: 2 points (HMRC: VAT late submission).
VAT, quarterly returns: 4 points.
VAT, monthly returns: 5 points.

Questions

Who sees the penalty notices?

The main agent and the client. A supporting agent cannot view or appeal penalties (HMRC: choose agents).

Can a point or penalty be appealed?

Yes. HMRC says a client who disagrees with a point or penalty can appeal (HMRC: penalties).

What about clients not using the service?

Their returns stay under the existing Self Assessment penalties. See Self Assessment deadlines and penalties.

Can a client who cannot pay avoid the penalty?

HMRC asks clients to contact it as soon as possible. In the first year, agreeing a payment plan within 30 days stops a penalty (HMRC: penalties).

In Accountin

In Accountin, each business's update periods show their due dates and whether HMRC has received them, and the deadlines dashboard lists what is due next across clients.