MTD Penalty Calculator
Understand how HMRC's points-based penalty system works and estimate what late submissions or payments could cost you. Knowledge is the best defence.
First-year grace period: 2026–27
HMRC will not issue penalty points for missed quarterly updates during the first year of MTD (2026–27 tax year). You have time to settle into the new routine before penalties apply. This grace period covers quarterly update deadlines only, so the Final Declaration and the tax you pay sit outside it — paying late has its own first-year relief, below. HMRC — penalties for Making Tax Digital for Income Tax: “There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.”
Late Submission Penalties
There are two late-submission regimes and they do not share a threshold. If you are required to use Making Tax Digital for Income Tax, each missed quarterly update or tax return deadline earns one penalty point and the threshold is 4 points. While you are volunteering ahead of mandation, HMRC issues no penalty points for missed quarterly update deadlines at all — only for tax returns you submit late — and the threshold is 2 points. Reaching your threshold costs £200 either way, and every further missed submission while at the threshold costs another £200. Below the threshold, points expire automatically 24 months after being awarded; once you reach the threshold, resetting to zero needs a clean run of on-time submissions — 12 months of them if you are required to use MTD, your next 2 tax returns while volunteering — plus filing any submissions still outstanding from the previous 24 months.
You are required to use it once your gross qualifying income — self-employment plus UK and foreign property combined — passes the threshold for the assessment year: above £50,000 in 2024-25 means mandation from 6 April 2026, then £30,000 in 2025-26 means mandation from 6 April 2027, and £20,000 in 2026-27 means mandation from 6 April 2028. Below that, signing up now makes you a volunteer, and the volunteer rules are HMRC's guidance Penalties for Income Tax Self Assessment volunteers: “While you are volunteering you will not get penalties for missing quarterly update deadlines” and “The penalty point threshold is 2 points.”
How do points expire?
Below the £200 penalty threshold, each point expires automatically 24 months after the month it was awarded — you don't need to do anything. Once you reach the threshold, HMRC will not reset your points to zero until you have completed a clean run of on-time submissions — 12 months of them if you are required to use MTD, your next 2 tax returns while volunteering — and filed every submission that was due in the previous 24 months. You can also appeal an individual point if you had a reasonable excuse.
Late Payment Penalties
Late payment penalties are separate from submission penalties and apply to the tax you owe, not to your quarterly updates.
How long you have depends on whether it is your first year. HMRC's guidance Penalties for Making Tax Digital for Income Tax sets both windows. In your first year of the new penalties you have 30 days from the payment due date to pay in full or agree a payment plan with HMRC before penalties start, and there is no penalty at all if you pay between 16 and 30 days late. After your first year that window reduces to 15 days, and paying 16–30 days late costs 3% of the tax outstanding at day 15 (4% from 2027–28).
"Your first year" is your first year in the regime, not a fixed tax year. Landlords mandated from April 2026, April 2027 and April 2028 each get their own first year, and so does anyone who signed up voluntarily earlier. HMRC gives the 30-day window once per taxpayer, not once per cohort: if you volunteered and are now required to use Making Tax Digital for Income Tax, that voluntary year was your first year and you continue to have 15 days — answer "No" above.
Source: HMRC — penalties for Making Tax Digital for Income Tax, which states the 30-day first-year window reducing to 15 days afterwards, "3% of the tax owed at day 15, or no penalty if it's your first year" for payment 16 to 30 days late, and "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".
Days 1–15
No penalty
No penalty in any year — pay now to avoid charges.
Days 16–30
First year: no penalty
After your first year: 3% of the tax outstanding at day 15 (4% from 2027–28).
Day 31+
~6% + 10% p.a.
3% at day 15, 3% at day 30, then 10% p.a. ongoing — the same in your first year (4% + 4% from 2027–28).
Estimate your late payment penalty
Your first year is the first year you are in the regime, not a fixed tax year — landlords mandated from April 2026, April 2027 and April 2028 each get their own. You only get the 30-day window once: if you volunteered before you were required to join, that earlier year was it, and you continue to have 15 days now (HMRC's guidance Penalties for Making Tax Digital for Income Tax).
Quick Reference
| Scenario | Consequence |
|---|---|
| Miss a quarterly update — required to use MTD | 1 penalty point |
| Miss a quarterly update — while volunteering | No penalty point |
| Miss a tax return deadline — either regime | 1 penalty point |
| Reach the points threshold — 4 points if required to use MTD, 2 points while volunteering | £200 financial penalty |
| Each further miss at threshold | Additional £200 each time |
| Below threshold: 24 months since a point was awarded | That point expires automatically |
| At threshold: clean run on-time + backlog filed — 12 months required to use MTD, next 2 tax returns volunteering | Points reset to 0 |
| Pay tax 1–15 days late | No penalty, in any year |
| Pay tax 16–30 days late — your first year in the regime | No penalty |
| Pay tax 16–30 days late — after your first year | 3% of the tax outstanding at day 15 |
| Pay tax 31+ days late — first year or not | ~6% total + 10% per annum ongoing |
| Late payment rates from 2027–28 | Each 3% charge becomes 4% |
| 2026–27 quarterly updates (grace) | No penalty points issued |
Source: HMRC — penalties for Making Tax Digital for Income Tax, HMRC — penalties for Income Tax Self Assessment volunteers and Making Tax Digital for Income Tax. Always check gov.uk for the current rates before relying on this page.
The easiest way to avoid penalties?
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