Making Tax Digital penalties: how the points system works

You get one penalty point for each submission deadline you miss, and a £200 penalty once you reach 4 points.

Once you are using Making Tax Digital for Income Tax, missing a single deadline does not cost you money. HMRC gives you a penalty point instead. You only pay a penalty, of £200, once you have collected 4 points. Missing a payment deadline is treated completely differently: those penalties are percentages of the tax you owe, and they start much sooner.

These new penalties replace the old Self Assessment late filing and late payment penalties from the tax year you join Making Tax Digital for Income Tax. The old penalties still apply to earlier years. If you joined on 6 April 2026, your 2025 to 2026 tax return, due 31 January 2027, is still under the old rules.

You get one penalty point for each deadline you miss

Late submission penalties are points based. You get one point for each tax return deadline you miss, and, from the 2027 to 2028 tax year onwards, one point for each quarterly update deadline you miss.

You can only get one point per deadline. This matters if you have more than one business. If you run a trade and let out a property, you send a quarterly update for each, but if you send both of them late for the same quarter you still only pick up one point, not two. That applies from the 2027 to 2028 tax year, which is when late quarterly updates start earning points at all.

Points for Making Tax Digital for Income Tax are counted separately from any VAT penalty points you already have. Reaching a threshold in one does not affect the other.

The new penalties do not apply to non-resident company returns, trust or estate returns, or partnership returns. Those keep the existing late submission and late payment penalties.

What happens when you reach 4 points

The penalty point threshold is 4 points. When you reach it, HMRC charges you a £200 penalty. After that you get a further £200 penalty every time you miss another submission deadline, so each missed deadline beyond the fourth costs another £200.

There is no sliding scale below the threshold. Three missed deadlines cost you nothing in money, though the points sit on your record.

Quarterly updates are not penalised in the 2026 to 2027 tax year

This is the part people most often get wrong. There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.

That does not make quarterly updates optional. You still have to keep digital records and send your quarterly updates, because you cannot submit your tax return for the year until you have. And penalties still apply for a late tax return or a late payment in that year, so a late return does earn you a point.

From the 2027 to 2028 tax year onwards, late quarterly updates do earn points. The quarterly update deadlines are:

Standard update period	Deadline
6 April to 5 July	7 August
6 April to 5 October	7 November
6 April to 5 January	7 February
6 April to 5 April	7 May (in the following tax year)

If you use calendar update periods instead, which run from 1 April and end on the last day of the month, the deadlines are the same four dates. Your tax return and any tax you owe are both due by 31 January after the end of the tax year. There is more detail in quarterly update deadlines.

How penalty points come off your record

It depends on whether you have hit the threshold.

If you are below 4 points, HMRC removes each point automatically 24 months after the deadline you missed. You do nothing. The points simply age out one by one.

If you have reached 4 points, they stop expiring individually. To clear them you have to meet both of these conditions:

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

When both are met, all your points are removed together. You can sign in to your HMRC online services account to see the date your points are due to come off.

In exceptional circumstances, such as insolvency, HMRC may cancel a penalty or a point, or wipe your points entirely.

If you are volunteering, the threshold is 2 points

If you signed up before you were required to, different numbers apply. Volunteers get a point only for a late tax return, not for late quarterly updates, and the threshold is 2 points rather than 4. The penalty at the threshold is still £200.

To clear points as a volunteer you need to submit your next 2 tax returns on time and submit any outstanding returns for the previous 24 months.

If you later become required to use the service, your threshold rises from 2 to 4 and your existing points are adjusted so you are no closer to the new threshold than you were to the old one. One point against a 2-point threshold becomes 3 points against a 4-point threshold, leaving you 1 point away either way.

Late payment penalties are separate and are not points based

Paying late is not a points matter. Late payment penalties are charged as a percentage of what you owe, on every late payment, and they get larger the longer the money is outstanding.

They apply to a balancing payment on your tax bill and to amounts due after an amendment or an assessment. They do not apply to payments on account.

How late the payment is	2026 to 2027 tax year	2027 to 2028 tax year
Up to 15 days	No penalty	No penalty
16 to 30 days	3% of the tax owed at day 15, or no penalty if it is your first year	4% of the tax owed at day 15, or no penalty if it is your first year
31 days or more	3% of the tax owed at day 15, and 3% of the tax owed at day 30, plus 10% a year on the outstanding amount charged daily from day 31 until you pay, for up to 2 years	4% of the tax owed at day 15, and 4% of the tax owed at day 30, plus 10% a year on the outstanding amount charged daily from day 31 until you pay, for up to 2 years

In your first year under the new penalties you get 30 days from the due date to pay in full or agree a payment plan before penalties start. After that first year the grace period drops to 15 days. You only ever get the 30-day version once, so if you volunteered and are now required to use the service, you stay on 15 days.

Interest is charged on top of any penalty

Late payment interest runs from the first day your payment is late until you pay in full, whether or not you also get a penalty. Making Tax Digital did not change how it works.

The rate is the Bank of England base rate plus 4%. It has been 7.75% a year since 9 January 2026. It moves when the base rate moves, so check the current figure before working out what you owe.

If you cannot pay on time

Contact HMRC before the deadline if you are going to struggle. If you agree a payment plan and keep to it, penalties are paused from the date you got in touch. You can still be charged if no plan can be agreed, or if you agree one and then miss the instalments.

Appealing a point or a penalty

HMRC writes to you whenever you get a late payment penalty, a late submission point, or a £200 late submission penalty. If you disagree, the letter tells you how to appeal.

If you become exempt later

If you become exempt during the 2026 to 2027 tax year, you go back to the old Self Assessment late filing and late payment penalties.

If you become exempt in the 2027 to 2028 tax year, you stay under the new penalties, because from April 2027 they apply to everyone who submits a personal Self Assessment tax return. Your threshold drops from 4 points to 2, and any points you already hold are reduced so you are no closer to the new threshold. Three points against a 4-point threshold becomes 1 point against a 2-point threshold. See exemptions for who can apply.

The practical takeaway

The submission penalties are forgiving if you are occasionally late and expensive if you are habitually late. The payment penalties are the opposite: in a normal year they start once your payment is more than 15 days late, and they keep building after that. So pay on time first, then file on time, and if money is tight contact HMRC before the due date rather than after it.

Also plan for the fact that quarterly updates and the year-end tax return are separate submissions with separate deadlines. A late tax return earns a point in any year, and late quarterly updates earn points from the 2027 to 2028 tax year onwards. This service sends in-year quarterly updates for self-employment and UK property but does not handle the year-end tax return, the step some software calls the final declaration, so you will need another route for it. Do I still file a Self Assessment tax return? explains how the two fit together.

If you are not sure any of this applies to you yet, start with do I need to use Making Tax Digital for Income Tax?. The rules apply from 6 April 2026 if your qualifying income was over £50,000 in 2024 to 2025, from 6 April 2027 if it was over £30,000 in 2025 to 2026, and from 6 April 2028 if it was over £20,000 in 2026 to 2027. Qualifying income is your total self-employment and property income before expenses, taken from the tax return you submitted in the previous tax year.

Last reviewed 25 July 2026. This is general information about how Making Tax Digital works, not tax advice. We are not accountants. If your situation is complicated, speak to one, or check the guidance on GOV.UK.