MTD Penalties Explained: What Happens If You Miss a Deadline

One of the biggest concerns around Making Tax Digital is penalties. What happens if you’re late? What if you miss a quarterly update? What does the “soft landing” actually protect you from?

This guide breaks down HMRC’s new penalty system in plain English.

Year 1 (2026/27): The Soft Landing

HMRC has confirmed that during the first year, there will be no penalty points for late quarterly updates. This is the “soft landing.”

What the soft landing covers:

→ No penalty points for late quarterly submissions during 2026/27

What the soft landing does NOT cover:

→ You are still expected to register for MTD from 6 April 2026

→ You must still keep digital records from that date

→ Late filing of your End of Period Statement or final declaration can still attract penalties

→ Late payment penalties apply from the start

The soft landing is breathing room, not a free pass.

Year 2 Onward (From April 2027): Full Enforcement

From the 2027/28 tax year, the full penalty regime kicks in.

How the Points System Works

→ Each late quarterly submission earns you one penalty point

→ Four points = £200 fine

→ Every subsequent late submission after the threshold = another £200

→ Points only reset once you’ve submitted all outstanding returns and stayed up to date for a set compliance period

How Quickly Can Points Stack Up?

A sole trader with one business could hit four points in a single year. A sole trader who is also a landlord, with eight quarterly updates per year, could reach it even faster.

Late Payment Penalties

Separate from the points system, HMRC charges penalties for late payment of tax owed:

→ No penalty if you pay within 15 days of the due date

→ First penalty charge if 16–30 days late

→ Second, higher penalty if more than 31 days late

→ Interest accrues on all outstanding balances

Late payment penalties apply from Year 1, they are not covered by the soft landing.

How to Reset Your Penalty Points

To reset to zero: submit all outstanding returns, then maintain a clean compliance record for typically 24 months. Catching up doesn’t immediately clear your record.

The Bottom Line

The penalty system encourages consistent, on-time compliance. For anyone who ignores MTD or routinely misses deadlines, the financial consequences are real.

The soft landing gives you Year 1 to find your feet. Use it wisely.

→ Don’t risk penalties. Get registered today