Making Tax Digital Penalties: Points, Fines & Interest

Last updated: 8 October 2026 · Next review: April 2027

Making Tax Digital (MTD) for Income Tax comes with a new penalty system. It’s more forgiving of a one-off slip than the old flat-rate fines, but with four quarterly updates and a tax return every year, there are more deadlines to miss — and late payment charges now build up faster the longer tax goes unpaid.

Everything below comes from HMRC’s official guidance on penalties for Making Tax Digital for Income Tax (last updated 30 March 2026). If you’re not sure whether MTD applies to you yet, start with our guide to MTD for landlords.

There are two separate types of penalty

Late submission penalties — for sending a quarterly update or tax return late. These use points.
Late payment penalties — for paying your tax late. These are percentages of the tax owed, plus interest.

You can get one without the other. Submitting on time but paying late still triggers late payment penalties, and paying on time but submitting late still earns points.

Late submission: the points system

How points build up

You get 1 point for each deadline you miss.
Deadlines include quarterly updates and your tax return.
You only get 1 point per deadline, even if you have more than one income source (for example two property businesses, or property plus self-employment).

When points become a fine

Once you reach 4 points, you’re charged a £200 penalty.
Every further missed deadline while you’re at the threshold means another £200.

First-year easement

For the 2026–27 tax year, HMRC says you won’t get points for missing quarterly update deadlines. Quarterly updates count towards points for tax years after that. Your tax return deadline still counts.

How points expire

If you’re below 4 points: each point expires automatically 24 months after the deadline you missed.
If you’ve reached 4 points: your points only reset when you meet both of these conditions:
1. you send your quarterly updates and tax return on time for 12 months; and
2. you’ve sent any outstanding quarterly updates and tax returns for the previous 24 months.

Example

A landlord misses the 7 November quarterly update in 2027, the 7 May update in 2028 and the 31 January 2029 tax return deadline. That’s 3 points — no fine yet. A fourth missed deadline would trigger a £200 penalty, and each one after that another £200, until they’ve complied for 12 months and caught up on anything outstanding.

Late payment penalties

Late payment penalties apply if you don’t pay the tax you owe in full by the due date. The rates change between the first MTD year and later years.

2026–27 tax year

How late	Penalty
Up to 15 days	No penalty
16–30 days	3% of the tax owed at day 15 — or no penalty if it’s your first year
31 days or more	3% of the tax owed at day 15 plus 3% of the tax owed at day 30, plus 10% a year on the outstanding amount, charged daily from day 31

2027–28 tax year onwards

How late	Penalty
Up to 15 days	No penalty
16–30 days	4% of the tax owed at day 15
31 days or more	4% at day 15 plus 4% at day 30, plus 10% a year on the outstanding amount, charged daily from day 31

Setting up a payment plan with HMRC within the grace period can stop penalties building, so if you can’t pay in full, contact HMRC early.

Worked example

You owe £4,000 and pay it 45 days late, with the full amount outstanding throughout:

Charge	2026–27 rates	2027–28 rates
Penalty at day 15	£120 (3%)	£160 (4%)
Penalty at day 30	£120 (3%)	£160 (4%)
10% a year for 15 days (day 31 to 45)	£16.44	£16.44
Total penalties	£256.44	£336.44

This is a simplified illustration of HMRC’s published rates. It ignores the first-year easement for 16–30 days and part-payments. Late payment interest is charged on top — HMRC says there are no changes to how interest works.

How MTD penalties compare with the cost of software

A single £200 late submission penalty is roughly equivalent to a year of many entry-level software plans, and late payment penalties on a few thousand pounds of tax can exceed that within weeks. Deadline reminders, which most MTD software includes, are one of the cheapest forms of protection. See our software comparison.

How to avoid MTD penalties

Diary every deadline: 7 August, 7 November, 7 February, 7 May and 31 January. See our step-by-step MTD checklist.
Keep records up to date monthly so each quarterly update takes minutes, not days.
Use the first-year easement to practise, not as a reason to ignore quarterly updates.
Set aside tax as rent comes in, so payment deadlines don’t catch you short.
Talk to HMRC early if you can’t pay — a payment plan within the grace period can prevent penalties.
Keep evidence if something outside your control stops you meeting a deadline; HMRC has an appeals process for penalties.

Appealing a penalty: what counts as a reasonable excuse

If you get a penalty and believe you had a good reason for missing a deadline, you can appeal. HMRC’s guidance on reasonable excuses gives examples of what may be accepted, including:

the death of a partner or another close relative shortly before the deadline;
an unexpected stay in hospital that stopped you dealing with your tax affairs;
a serious or life-threatening illness;
failure of your computer or software while preparing your submission;
problems with HMRC’s online services;
a fire, flood or theft that prevented you from completing your return;
unforeseeable postal delays.

HMRC says these won’t usually be accepted:

not having enough money to pay;
finding HMRC’s online system difficult to use;
not receiving a reminder from HMRC;
making a mistake on your return.

Keep evidence of anything that affects your ability to meet a deadline — for example, screenshots of software errors, or correspondence with your software provider.

Using an agent doesn’t transfer the responsibility

Many landlords use an accountant to submit quarterly updates. That’s sensible, but the legal responsibility for meeting MTD deadlines stays with you. Agree in writing who submits each update and when you’ll provide your records, and ask for confirmation once each submission is made. HMRC lists relying on an agent who failed to submit among circumstances it may consider, but it’s far better not to need to rely on that.

Planning your tax payments

Late payment penalties are charged on tax you haven’t paid, not on submissions. The simplest protection is to set aside a percentage of each month’s rental profit in a separate savings account. Your quarterly updates give you a running picture of profit through the year, which makes it easier to estimate your bill before it’s due — one of the genuine benefits of MTD.

Frequently asked questions

What is the penalty for a late MTD quarterly update? One penalty point. You’re only fined (£200) once you reach four points. In the 2026–27 tax year, HMRC isn’t giving points for late quarterly updates.

Do MTD penalty points expire? Yes. Below the threshold, each point expires after 24 months. At the threshold, you need 12 months of on-time submissions and to have caught up on anything outstanding from the previous 24 months.

What are the late payment penalty rates? 3% at day 15 and 3% at day 30 in 2026–27, rising to 4% and 4% from 2027–28, plus 10% a year charged daily from day 31, plus interest.

Can I appeal an MTD penalty? HMRC provides an appeals process. Check the official guidance for how and when to appeal.

If I have two rental properties, do I get two points per missed deadline? No. HMRC gives only one point per deadline, even with more than one income source.

Sources

This article summarises official guidance and is not tax advice. Last checked: 8 October 2026.

Related guides

Figures are published examples, estimates and averages, not quotes. Rules change: check the linked official source before you act.

About this guide: written and edited by the LandlordCosts Team. We are not solicitors, accountants or insurance brokers; every figure is linked to its source. Read how we research costs, our editorial policy and more about us.