Making Tax Digital Penalties 2027/28

From the 2027/28 tax year, missing a Making Tax Digital (MTD) quarterly update can create a penalty point. Once you reach 4 points, HMRC says you receive a £200 penalty, and another missed submission deadline can trigger another £200 charge. Late payment is a separate issue: payment penalties are based on how long the tax remains unpaid and are not points-based.

This guide is for UK individuals using MTD for Income Tax, including landlords and sole traders. It explains the quarterly-update points system, the transition from 2026/27, late-payment exposure, reasonable excuses and what to do when a penalty notice arrives.

Which MTD deadlines create points?

For tax years after 2026/27, HMRC says you receive one penalty point for each missed quarterly-update deadline or missed tax-return deadline. The points system applies to the MTD submissions covered by the new regime; it does not merge your MTD points with VAT penalty points.

The important distinction is between the reporting deadline and the payment deadline:

Do not assume that paying the tax on time fixes a late quarterly update. Likewise, submitting the update does not pay the tax that will eventually be due.

How the 4-point threshold works

Four points is the threshold for a quarterly filer. When you reach it, HMRC charges £200. After the threshold has been reached, each further missed submission deadline can result in another £200 penalty.

Points are linked to deadlines, not to the amount of income or tax. A landlord with a small tax bill can still receive points for late reporting, while a person with a large liability does not receive extra points simply because the liability is high.

If you are below the threshold, individual points are automatically removed 24 months after the missed deadline. Once you reach the threshold, HMRC's conditions for removing the points are stricter: you must submit on time for 12 months and complete outstanding submissions from the previous 24 months.

What is different about 2026/27?

MTD for Income Tax begins for the first mandatory cohort on 6 April 2026. HMRC's current penalty guidance says there are no penalties for missing quarterly updates during 2026/27, even though the updates are still required before you can submit the tax return.

HMRC lists these quarterly-update deadlines for 2026/27:

The transition does not mean that all 2026/27 obligations are penalty-free. The tax return and payment still have their own deadlines, and HMRC can apply the relevant late-payment rules. Use the transition year to establish a reliable records and review process before the points regime applies to quarterly updates.

Late-payment penalties in 2027/28

Late payment is calculated separately from late submissions. For the 2027/28 tax year, HMRC's published table says:

Late-payment interest is also charged from the first day the payment is late. The percentage is applied to the unpaid amount, so a part-payment can reduce the later penalty base. Contact HMRC promptly if you cannot pay and ask whether a payment plan is available; do not wait for the penalty to grow before explaining the problem.

What counts as a reasonable excuse?

If an exceptional event prevented you from meeting a deadline, you may be able to appeal a penalty. HMRC considers the facts and expects you to submit or pay as soon as reasonably possible after the excuse ends. Examples can include serious illness, bereavement, an unexpected hospital stay, fire or flood destroying records, or a major HMRC service failure.

A lack of funds is not automatically a reasonable excuse for a late payment. Do not assume that an adviser or software problem automatically cancels a penalty: explain the facts, show what prevented compliance, and act as soon as possible after the problem ends. Keep evidence such as medical records, outage notices, correspondence, timestamps and proof of the date you completed the missing submission.

How to appeal an MTD penalty

HMRC will send a penalty notice explaining the point or charge and how to appeal. Read the notice carefully and use the appeal route described there. Explain:

• which deadline was missed;
• what happened and when it happened;
• why it prevented timely submission or payment;
• what you did immediately after the problem ended; and
• any evidence supporting the explanation.

Appeal as soon as possible rather than waiting for another notice. If the penalty is upheld, check whether you can request a review or use the next appeal route identified by HMRC. Keep a copy of the submission confirmation and all communications.

A landlord example

Maya joins MTD for Income Tax for 2027/28 because her qualifying property income is above the relevant threshold. She misses one quarterly-update deadline because her software account was not connected, then submits the update late. She receives one penalty point, but not an immediate £200 charge because she is below the 4-point threshold.

Later in the year, she misses three more deadlines. Once the fourth point is recorded, HMRC can charge £200. If she also leaves her final tax payment unpaid, a separate payment penalty and interest calculation can apply. The reporting points and the payment charges are not one combined fine.

Frequently Asked Questions

Build evidence before a deadline is missed

Keep a compliance calendar showing the reporting period, statutory deadline, payment deadline, agent responsibility and acknowledgement received. Test the software connection before the period closes and save the confirmation. If a submission fails, capture the error, contact the provider, and submit through the permitted alternative as soon as possible. A later successful submission does not erase the earlier failure, but it helps demonstrate prompt corrective action.

For an appeal, distinguish a reasonable excuse from a disagreement with the tax calculation. Explain the event, dates, effect, recovery steps and evidence. Keep a copy of the appeal and the decision. Review the control that failed so the next period is not built around the same assumption.

Keep a separate note of the exact deadline and time zone shown by the official service.

After a correction, save the new acknowledgement and note whether the correction affects a later annual return or payment calculation.

When a penalty appears, separate the questions

First check what was late: a quarterly update, an annual return, a payment or a correction. Then check the tax year, due date, submission receipt and bank reference. An appeal should address the particular penalty and event. A general complaint about the system may not explain why a return was late or why a payment reached the wrong account.

If a reasonable excuse arose, document the date it began, when it ended, what prevented compliance and what was done immediately afterwards. Keep outage messages, medical evidence, bereavement documents or agent correspondence where relevant. Do not invent a reason after the event. If the excuse no longer applies, submit or pay promptly and explain the delay.

Agents and software providers can help, but the taxpayer should monitor deadlines and acknowledgements. Set a reminder before the statutory date and a second reminder to verify acceptance. This simple control catches failed authorisations, rejected submissions and payments sent with the wrong reference.

If software or an agent submits on your behalf, you remain responsible for checking the acknowledgement and correcting an error promptly.

Avoiding penalties with an evidence trail

The safest penalty control is a dated record of what was due, what was submitted, what was paid and why an exception applied. Keep software confirmations, submission receipts, bank references, HMRC messages, agent authorisations and notes of outages or exceptional circumstances. A screenshot of a completed form is useful, but the submission acknowledgement is stronger evidence that HMRC received it.

Separate late filing from late payment. A return can be filed on time while the tax remains unpaid, and an appeal against one penalty does not automatically cancel another. Reconcile payments to the correct tax year and reference, especially where payments on account or a payment plan are involved. If an amount is disputed, pay what is not disputed where possible and record the basis of the dispute.

When appealing, explain the event, the dates, the steps taken to comply and the evidence attached. Do not rely only on “I did not know”. Check whether HMRC's appeal route has a deadline and whether reasonable-excuse guidance fits the facts. Keep the appeal, review request and final decision together so the next filing is not built on an unresolved assumption.

Estimate your exposure with the HMRC Penalty Calculator→, then read the MTD landlord guide and the MTD overview for the wider reporting workflow.

Official sources

• HMRC: Penalties for Making Tax Digital for Income Tax
• HMRC: Making Tax Digital collection
• HMRC: Step-by-step guidance for sole traders and landlords
• HMRC: Send quarterly updates
• HMRC: Submit your tax return

These HMRC pages are the official references for MTD penalties, updates, tax-return submission and the wider implementation. Check the current rules and penalty period before relying on an estimate.