Making Tax Digital penalty points and late payment penalties

Making Tax Digital for Income Tax is a more regular way of sending tax information to HMRC: instead of one return a year, you send quarterly updates through compatible software¹. It applies to self-employed people and landlords with qualifying income over £50,000 a year, and it began on 6 April 2026 for some sole traders and individual landlords².

Miss a quarterly update and you collect a penalty point. While the temporary measure applies your threshold is two points, and once you reach it you pay a £200 penalty, with a further £200 for each submission deadline you miss while at your threshold². Once the temporary measure ends the threshold becomes four points². Points-based penalties for missed quarterly updates apply from the second year of Making Tax Digital for Income Tax onwards⁴.

Paying late is charged separately from filing late. For the 2025 to 2026 and 2026 to 2027 tax years, a payment between 16 and 30 days overdue carries a penalty of 3% of the tax owed at day 15, and a payment 31 days or more overdue carries 3% of what was outstanding at day 15 plus 3% of what was still outstanding at day 30, then a daily rate of 10% a year on the balance². In your first year of Making Tax Digital for Income Tax, HMRC will not add a late payment penalty until your payment is more than 30 days late⁵.

How Making Tax Digital penalty points work

The penalty system for Making Tax Digital is built on points rather than an immediate fine. Each time you miss a submission deadline you receive a penalty point. Nothing is charged at that stage. The money only appears when your points reach the threshold, and the threshold depends on how often you are required to submit.

HMRC's points-based regime sets the threshold by submission frequency: two points for an annual submission and four points for a quarterly submission, which includes Making Tax Digital for Income Tax⁷. That is the long-run design. While the temporary measure applies, the threshold for Making Tax Digital is two points, and it becomes four points once the temporary measure ends².

Points-based penalties for missed quarterly updates apply from the second year of Making Tax Digital for Income Tax onwards⁴. Before that, the obligation to send quarterly updates exists but the points regime for quarterly deadlines has not yet started. Late tax returns under Making Tax Digital are treated differently and can attract penalties straight away¹.

There is also a digital exclusion route. It applies to those who cannot reasonably comply with the requirements because of age, disability or a medical condition, no reliable internet access, or religious beliefs prohibiting electronic devices³. Where that applies, the requirement to file quarterly updates through software does not.

Penalty points threshold: two points now, four later

The threshold is the number of points at which a financial penalty is triggered. It is not a limit on how many points you can collect, and it is not reset by paying a bill.

While the temporary measure applies, your penalty threshold will be two points². That covers people who are volunteering into Making Tax Digital and those required to join during the 2026 to 2027 tax year. Once the temporary measure ends, your penalty threshold will be four points². The four-point figure matches HMRC's standard design for quarterly submissions⁷.

The practical difference is significant. At a two-point threshold, two missed quarterly updates in the same period are enough to trigger a charge. At four points, it takes four. Points stay on your record rather than expiring after each deadline, so a missed update in one quarter counts towards the threshold alongside a missed update in the next.

£200 penalty once you reach the threshold

Reaching the threshold produces a £200 penalty. The same source sets out what happens next: a £200 penalty if you reach your penalty points threshold, and a further £200 penalty each time you miss a submission deadline while at your threshold². HMRC's own wording on the wider regime is that once 4 points are accumulated, a £200 fixed penalty is charged⁴.

So the charge is not a one-off. Once you are at the threshold, every further missed deadline adds another £200 until you clear the points. The way to clear them is to submit the outstanding updates, not to pay the penalty.

For comparison, the older Self Assessment late filing penalties for non-Making Tax Digital years work differently: at least 3 months late, the charge is £10 for each day up to a maximum of £900⁵. Those figures belong to the pre-Making Tax Digital regime and are not the Making Tax Digital points system.

Late payment penalties: 3% at day 15 and day 30, then a daily rate

Late payment is a separate charge from late filing, and it is calculated on the tax you owe rather than on the update you failed to send. For the 2025 to 2026 and 2026 to 2027 tax years the structure has two stages.

Between 16 and 30 days overdue, the penalty is 3% of the tax you owed at day 15⁵. At 31 days or more overdue, it is 3% of what was outstanding at day 15 plus 3% of what was still outstanding at day 30⁵. After that, a second late payment penalty is calculated at a daily rate of 10% per year on the outstanding balance⁵. The same rates appear in independent guidance covering the same tax years⁸.

The 2024 to 2025 tax year, which was the volunteer phase, used lower rates. There was no penalty up to 15 days late. From 16 to 30 days late the charge was 2% of the tax owed at day 15, and at 31 days or more it was 2% of what was outstanding at day 15 plus 2% of what was still outstanding at day 30, then a daily rate of 4% a year on the balance⁸.

Sources:⁸

Is there a late payment penalty in my first year?

In your first year of Making Tax Digital for Income Tax, HMRC will not add a late payment penalty until your payment is more than 30 days late⁵. That is a genuine easement on the new penalties, and it means a payment that slips past the deadline by a fortnight does not attract the 3% charge in that first year.

After the first year, the trigger moves earlier. Penalties start if payment is more than 30 days late in the first year of the new penalties, and more than 15 days late after the first year³. The first-year easement applies to the late payment penalty, not to interest, which runs on unpaid tax regardless.

The first-year treatment matters most for people joining Making Tax Digital for the first time, who are also getting used to quarterly updates and new software. It does not change the filing obligation, and it does not change the points regime for missed submissions.

What counts as a missed deadline

There are two kinds of deadline under Making Tax Digital, and they are not the same.

The quarterly update deadlines are 7 August for quarter 1 (6 April to 5 July), 7 November for quarter 2 (6 July to 5 October), 7 February for quarter 3 (6 October to 5 January) and 7 May for quarter 4 (6 January to 5 April)⁶. Missing any of these is a missed submission deadline and adds a penalty point.

The payment deadlines are separate. All tax owed is still due by the Self Assessment deadline of 31 January, with the second Payments on Account instalment due by 31 July⁶. The Self Assessment bill itself is due by midnight on 31 January following the tax year you are paying for¹¹. Missing a payment deadline triggers the late payment penalties described above, not a penalty point.

When the penalty rules widen to all Self Assessment taxpayers

The new penalty rules are not confined to Making Tax Digital. The late payment penalty rules will apply to all Self Assessment taxpayers from 6 April 2027, regardless of whether they are in Making Tax Digital or not¹³. The points-based penalty system and the revised late payment penalties are planned to expand to all Self Assessment taxpayers from the same date¹³.

The Making Tax Digital population itself grows in stages. From April 2027 those with qualifying income over £30,000 must use Making Tax Digital for Income Tax, and from April 2028 the threshold falls to £20,000². The £20,000 figure applies to landlords and sole traders from April 2028⁶.

Separately, Self Assessment taxpayers with PAYE income, such as from employment or a pension, will need to pay towards their Self Assessment tax bill through their PAYE income, where they have enough income to do so, from April 2029¹⁷. That reform is separate from, but complementary to, Making Tax Digital¹⁷.

Do I still have to file if I had no income?

If HMRC has issued you a return, the obligation stands. Unless the return is withdrawn by HMRC you will have to submit the return by the due date, even if there is no income to report, and penalties for failing to file by the due date will still apply¹⁸. A nil return is still a return.

The wider rule is that if you get any income that is not being taxed through PAYE, you need to let HMRC know by doing a Self Assessment tax return¹⁹. Where HMRC has asked for information and you miss the deadline to send it, you may be charged a penalty²⁰.

If a return should not have been sent, HMRC can withdraw it, and asking HMRC to withdraw it is the route rather than ignoring it. Unless the return is withdrawn by HMRC, it has to be submitted by the due date, even if there is no income to report, and penalties for failing to file by the due date still apply²¹. If a return contains an obvious error or is missing information, HMRC corrects the return and sends a notice explaining why²². If a correction is disputed, there is a formal route to challenge it²².

Paying your bill and avoiding the late payment charge

The bill is due by midnight on 31 January following the tax year you are paying for¹¹. Paying in full by that date, and by 31 July for the second payment on account, avoids the late payment penalties entirely.

If you cannot pay in full, HMRC can agree an online payment plan. One of the conditions is that all your tax returns are up to date²³. Interest still runs on the amount owed while a plan is in place, so a plan spreads the cost rather than removing it.

There is also a scam risk around payment. HMRC may send you a text message saying you are due a tax refund, also known as a P800 refund, if they have sent a letter and have not had a response²⁴. A message that asks you to pay a penalty by an unusual method, or that arrives without a matching letter, is worth checking against HMRC's own guidance before you act on it²⁴.

Where to get help

Free, impartial help is available. TaxAid provides tax information and advice for people on lower incomes, including on problems paying tax debt¹. Business Debtline covers income tax debt in England and Wales, and has a separate guide for Scotland². MoneyHelper and the tax charities are the usual first stops for anyone who cannot pay and is worried about penalties.

If a penalty has been charged and you think it should not have been, the routes are an appeal, a complaint to HMRC, and ultimately the Adjudicator. A reasonable excuse, such as illness, disability or a bereavement, can be accepted. Where a return should never have been issued, asking HMRC to withdraw it is the cleanest route, because the filing obligation falls away with the return.