What happens if I miss an MTD deadline?

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If you miss a Making Tax Digital (MTD) deadline, HMRC will give you a penalty point. Think of it like getting points on your driving licence. If you collect four points, you will be hit with a £200 fine. Every deadline you miss after that will cost you another £200. On top of this, if you are late paying your actual tax bill, you will face separate financial charges and daily interest.

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Understanding the MTD Penalty Points System

As a self-employed person in the UK, dealing with taxes can already feel like a heavy burden. With Making Tax Digital for Income Tax officially kicking off in April 2026 for those earning over £50,000 (and April 2027 for those earning over £30,000), you will need to send digital updates to HMRC four times a year, plus a final annual return.

Because you will have more deadlines to keep track of, HMRC has changed how they punish late submissions. Instead of an immediate, massive fine the second you are late, they now use a slightly fairer, points-based system.

Here is exactly how it works:

• You get a point for being late: Every time you miss a filing deadline—whether it is one of your new quarterly updates or your final end-of-year tax return—you get one penalty point.
• You reach a threshold: Because self-employed people under MTD will be submitting quarterly (every three months), your limit is four points.
• You get fined: The moment you hit that fourth point, HMRC will issue a strict £200 fine.
• The fines continue: If you stay at that four-point limit and miss another deadline, you will get another £200 fine for every single missed update until you wipe your slate clean.

How Do You Wipe the Slate Clean?

Luckily, penalty points do not last forever.

If you just make a silly mistake and get one or two points, they will automatically expire after 24 months.

However, if you have hit the four-point limit and want to get back to zero, you have to prove to HMRC that you are back on track. To reset your score, you must submit every single update perfectly on time for a full 12-month period, and make sure any outstanding past returns have finally been handed in.

Filing Late vs. Paying Late

It is very important to know that filing your updates and paying your tax are treated as two completely different things by HMRC.

• Late Filing: Gets you penalty points (and eventually a £200 fine).
• Late Payment: Gets you hit in the wallet straight away.

If you do not pay the tax you owe by the traditional 31st January deadline, HMRC will add a percentage-based penalty on top of your bill. The longer you wait to pay, the higher that penalty grows. Plus, they will charge you daily interest starting from day one until the debt is cleared.

A Quick Grace Period for 2026/2027

If you are joining MTD for Income Tax in April 2026, HMRC is offering a tiny bit of breathing room while you get used to the new software.

For the 2026/2027 tax year only, they have stated they will not issue penalty points if you miss a quarterly update deadline. However, you will still get penalised if you miss your final end-of-year return or if you pay your tax late. From the 2027/2028 tax year onwards, the training wheels come off, and points will apply to absolutely everything.

How to Protect Yourself and Avoid Fines

The best way to stay in HMRC’s good books is to get prepared early. Here are a few simple tips for your business:

1. Use Good Software: You have to use HMRC-approved software for MTD anyway. Pick one that is easy to use and automatically alerts you when a deadline is coming up.
2. Do Your Bookkeeping Weekly: Do not leave your income and expenses to pile up in a shoebox. If you log your digital receipts every week, your quarterly updates will take just a few clicks.
3. Set Phone Reminders: Put the four quarterly update deadlines (which usually fall in August, November, February, and May) into your phone’s calendar so they never catch you by surprise.
4. Talk to HMRC if You Cannot Pay: If you are struggling to pay your tax bill, do not just ignore it. Contact HMRC before the deadline to set up a payment plan. If they agree to let you pay in instalments, they will usually pause the late payment penalties.

Switching to Making Tax Digital means a change in your normal routine, but as long as you keep your records digital and hit ‘submit’ on time, you will never have to worry about collecting those penalty points.

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