Blog · 1 November 2026

MTD penalty points explained: when HMRC charges £200 (and when it doesn't)

The most common misunderstanding about Making Tax Digital penalties is that every missed quarterly update costs £200. It does not. For tax years after 2026/27, a missed quarterly update or tax return deadline earns you one penalty point — and the £200 charge only arrives when you reach 4 points. One late update is a warning on your record, not a bill. Four of them is.

The points system, in one paragraph

Under GOV.UK's guidance, the new late-submission penalties are points based. For each quarterly update (for tax years after 2026/27) or tax return deadline you miss, you get one penalty point. The threshold is 4 points: reach it and HMRC charges £200, then a further £200 each time you miss another submission deadline. You can only get one point per deadline — even if you have more than one business and send more than one quarterly update late. And if you are also registered for VAT, your MTD for Income Tax points are separate from your VAT points.

Worked example: how four slips become £200

Say you join MTD on 6 April 2027 and miss all four quarterly updates for 2027/28 — 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. The first three misses earn points 1, 2 and 3 and no charge. The fourth miss, on 7 May 2028, takes you to the 4-point threshold and triggers the £200 penalty. If you then also miss the tax return deadline of 31 January 2029, that is a further £200. The same four misses spread out with on-time submissions in between would still accumulate — points do not reset just because you filed on time once. Try your own pattern on the MTD penalty estimator to see exactly when a charge would land.

The 2026/27 grace year — and why it ends

There are no penalties for missing a quarterly update deadline for the 2026/27 tax year. That grace year protects the first wave — sole traders and landlords with qualifying income over £50,000 who started on 6 April 2026. It does not extend to later waves: from 2027/28, late quarterly updates earn points. If you join in the April 2027 £30,000 wave, your very first missed update counts. Note also that the grace covers quarterly updates only — the new penalties apply to you from the tax year you join MTD, and your tax return and payment deadlines carry their own consequences.

Do points ever go away?

Yes, but the route depends on whether you have hit the threshold. Below 4 points, GOV.UK says each point is automatically removed 24 months after the missed deadline. Once you reach the threshold, individual points are not removed automatically. Instead you must meet two conditions to clear all your points: send your quarterly updates and submit your tax return on time for 12 months, and send any outstanding quarterly updates and submit any outstanding tax returns for the previous 24 months. Paying the £200 penalty on its own does not reset your points. You can check the date your points will be removed in your HMRC online services account.

Late payment is a separate penalty — and it is not points based

Submitting late and paying late are penalised separately. Late payment penalties are not points based and apply each time a payment is not made in full by its due date — but they do not apply to payments on account, and late payment interest runs from the first day a payment is late until it is paid in full. In your first year of the new penalties you have 30 days from the payment due date to pay in full or contact HMRC to set up a payment plan; after your first year that window drops to 15 days. For payments for the 2027/28 tax year, GOV.UK's table is:

If you cannot pay on time, GOV.UK advises contacting HMRC as soon as possible: if a payment plan is agreed and you keep to it, penalties are paused from the date you contacted HMRC.

How to stay at zero points

1. Diary all four quarterly deadlines. 7 August, 7 November, 7 February and 7 May — see every wave on the MTD deadline calendar.
2. Confirm your start date first. Use the Making Tax Digital checker — penalties apply from the tax year you join, so knowing your wave tells you when points start counting.
3. Treat one point as the alarm, not the fine. A single point costs nothing, but it puts you one miss from the halfway mark — fix the process that caused it before the next deadline.
4. Separate filing from paying. Filing on time does not protect a late payment, and paying on time does not excuse a late update. Both clocks run independently.

If you disagree with a penalty point or penalty, HMRC sends a letter explaining how to appeal. In exceptional circumstances, such as insolvency, HMRC may cancel a penalty or point.

Sources

• GOV.UK — Penalties for Making Tax Digital for Income Tax (points, £200 threshold, point removal, late-payment table; checked 1 November 2026)
• GOV.UK — Quarterly updates: periods and deadlines

Free information tool — not tax advice. Figures follow GOV.UK guidance as checked on 1 November 2026. Confirm your own position with HMRC or an accountant.