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Work out MTD penalty points and late payment penalties
Making Tax Digital for Income Tax brings new penalties for late quarterly updates, late tax returns and late payments. They work in two separate ways, so the estimator has two parts. The first counts the points from deadlines you think you might miss and shows when you would reach the threshold. The second works out the penalty on an amount you expect to pay late.
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How the points are counted
GOV.UK gives one penalty point for each missed deadline for a quarterly update or a tax return, and explains that “You can only get one penalty point per deadline. This applies even if you have more than one business and send more than one quarterly update late (for tax years after 2026 to 2027).” The threshold is four points. The estimator starts from any points you already hold, then takes your missed deadlines in date order.
There is one exception in the first year. GOV.UK says “There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.” The updates are still needed, though, because you still need to keep digital records and send quarterly updates before you can submit your tax return. The tax return deadline for 2026 to 2027 is not covered by that exception, so under GOV.UK’s rules a late return for that year still adds a point.
Once you reach the threshold, GOV.UK lists what follows: a £200 penalty, and a £200 penalty each time you miss another submission deadline. The estimator therefore charges £200 on the deadline that takes you to the threshold and £200 on each later deadline that would have carried a point. GOV.UK adds: “If you’re also registered for VAT, your penalty points for Making Tax Digital for Income Tax are separate to your penalty points for VAT.”
Under GOV.UK’s rules, points do not last for ever. Below the threshold, each point is removed 24 months after the deadline you missed. At the threshold, all your points are removed only after 12 months of sending everything on time, once any updates and returns outstanding from the previous 24 months have also been sent. The estimator looks at one tax year’s deadlines at a time, so no point it adds would expire within it, but a point you already hold might have dropped off before the dates you pick.
The dates themselves are on the deadlines calendar, and each tax year has its own page: 2026 to 2027, 2027 to 2028 and 2028 to 2029.
How the late payment penalty is worked out
The late payment penalty does not use points. GOV.UK says it applies to each payment that is not made in full by its due date, which includes “a balancing payment for an outstanding amount on your tax bill” and “amounts due following an amendment or assessment on your tax return”. It also says “Late payment penalties do not apply to any payments on account that you may need to make.”
GOV.UK says that in your first year of the new penalties you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan. After the first year, the period is 15 days. GOV.UK adds: “You will only receive the 30-day period once — if you have volunteered and are now required to use Making Tax Digital for Income Tax, you will continue to have 15 days.”
| How late | Tax due for 2026 to 2027 |
|---|---|
| Up to 15 days | No penalty |
| 16 to 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 and 3% of the tax owed at day 30, plus a daily charge at 10% a year on the amount outstanding, from day 31 until the tax is paid or for up to two years |
For tax due for the 2027 to 2028 tax year, GOV.UK says the percentages will be 4% at day 15 and 4% at day 30, with the same daily charge after that. When we checked legislation.gov.uk on 31 October 2026, the regulations that would set those higher percentages had not yet been made, so the estimator gives no figure for that year. It still tells you which band a payment would fall in.
The estimator assumes the amount you owe stays the same until you pay it all. If you pay part of it, the percentages and the daily charge apply to less. It also leaves out late payment interest, which is a separate charge. GOV.UK says “From the first day your payment is late, until you pay in full, we’ll also charge late payment interest.” HMRC publishes the rate on its interest rates page.
If you cannot pay on time, it helps to talk to HMRC early. GOV.UK says “You can avoid penalties by contacting HMRC as soon as possible to discuss whether you can set up a payment plan and pay by instalments. If a payment plan is agreed and you make the payments, penalties will be paused from the date you contacted us.”
Who the new penalties cover in law
The regulations that brought the new penalties in so far cover people who had to use MTD in the 2026 to 2027 tax year and, under earlier regulations, volunteers who chose to come under them. When we checked legislation.gov.uk on 31 October 2026, the regulations that would do the same for the later intakes had not yet been made. Until they are, the estimator shows GOV.UK’s published rules for those later years, and says so beside the result.
On timing, GOV.UK says “Changes to late submission penalties and late payment penalties will apply to you from the tax year you join Making Tax Digital for Income Tax. The current penalties will still apply to previous tax years.”
Where GOV.UK does not say, and what the estimator does
GOV.UK describes the daily charge as an annual rate charged daily, without saying how a day’s share is worked out. The estimator spreads the annual rate evenly over 365 days and charges one day’s share for each day from day 31 to the day you pay, which is why it labels that part, and any total that includes it, as approximate. The letter HMRC sends you gives the exact amount.
GOV.UK also does not say whether the count keeps rising once you reach the threshold, so the estimator stops it at four and shows the £200 penalty for each further deadline instead.
If you volunteered for MTD, GOV.UK sets out separate rules, which the guide to signing up voluntarily explains. GOV.UK also says “In some exceptional circumstances, such as insolvency, HMRC may cancel a penalty or penalty point, or remove all penalty points.”
Where these rules come from
Every figure above comes from GOV.UK. The guide to MTD penalties walks through the same rules with an example.
- GOV.UK guidance: penalties for MTD for Income TaxGOV.UK last updated this page on 30 March 2026. We last checked it on 4 October 2026.
- GOV.UK guidance: HMRC interest rates for late and early paymentsGOV.UK last updated this page on 23 December 2025. We last checked it on 4 October 2026.
This is an estimate to help you plan, not tax advice. GOV.UK says “If you do not agree with the penalty point or penalty you can appeal. Your letter will tell you how to do this.”