MTD penalty points: how the points-based fine works

Making Tax Digital for Income Tax uses a points-based penalty for late submissions, the same model HMRC already uses for late VAT returns. Miss a deadline, get a point. Points on their own do not cost anything, a fixed charge only applies once you reach the threshold.

How points accrue

Each late quarterly update or late final declaration adds one point, up to a threshold of 4 points. Once you reach 4 points, a fixed £200 penalty applies, and that same £200 charge applies again for every further missed deadline while you remain at or above the threshold.

The transitional soft landing

For the 2026/27 tax year, the first year mandation applies to anyone, HMRC does not add a point for a late quarterly update. This soft landing covers quarterly updates only, a late final declaration still carries a point even in 2026/27. Treat the soft landing as time to get your record-keeping and software right, not as a standing exemption from deadlines in later years.

Points expire on their own

A single point expires automatically after 24 months of on-time submissions if you never reach the threshold. This happens without any action on your part, HMRC removes it from your record.

Resetting once you cross the threshold

Once you reach 4 points, expiry no longer applies automatically. Instead, to reset to zero, you must submit on time for 12 consecutive months, and bring any submissions from the prior 24 months fully up to date. Both conditions apply together, a long run of on-time filing does not reset your points if an older submission is still outstanding.

Worked example

Say you miss three quarterly updates outside the soft-landing year: three points, no charge yet. A fourth missed deadline takes you to the 4-point threshold and triggers the first £200 charge. Miss a fifth deadline before resetting and a second £200 charge applies, points do not need to keep climbing for further charges to bite once you are at the threshold.

Next steps

Enter your own missed deadlines, in order, into the MTD Penalty Points Estimator to see your running point total and whether you have crossed the charge threshold. If you have not yet joined MTD, start with the Making Tax Digital guide to confirm whether and when it applies to you.