Under Making Tax Digital for Income Tax, each missed quarterly update or tax return deadline earns one penalty point, and a £200 penalty is charged when you reach 4 points and for every missed deadline after that. For the 2026 to 2027 tax year HMRC will not give points for late quarterly updates, though a late return still earns one. Points expire after 24 months unless you are at the threshold, when a period of full compliance is needed to clear them.

Where do the penalty points rules come from?

The late submission regime is in Schedule 24 to the Finance Act 2021, the same points model already used for VAT. Paragraph 5 makes a person liable to one penalty point for each return not made by its due date. Paragraph 15 imposes a penalty of £200 for a failure occurring when the person already has the maximum number of points. For Income Tax the late submission and late payment penalties in this regime replace the old Self Assessment penalties from the tax year a person joins MTD.

HMRC’s guidance is clear that the new penalties do not apply to returns made by trustees, nominated partners or non resident companies. Those returns stay under the existing rules, set out in Self Assessment deadlines and penalties.

Which deadlines can earn a point?

Two kinds of submission count:

  • Quarterly updates, due 7 August, 7 November, 7 February and 7 May, for tax years after 2026 to 2027. The periods are explained in MTD quarterly periods.
  • The tax return, due 31 January after the end of the tax year.

HMRC’s guidance says you can only get one point per deadline, even if you have several businesses and more than one of their updates is late. That reflects paragraph 5(3) of Schedule 24, which limits liability to one point per month for each digital reporting sub group, and paragraph 5(5), which treats the limit as one per calendar quarter where different businesses’ due dates fall in different months.

What is the concession for the first year?

HMRC’s guidance states that there are no penalties for missing a quarterly update deadline in the 2026 to 2027 tax year. This covers the first cohort, who joined on 6 April 2026. It is narrower than it sounds:

  • The updates still have to be sent, because the software will not let you submit the tax return until they are.
  • Penalty points still apply to a late 2026 to 2027 tax return, due 31 January 2028.
  • The 2025 to 2026 return, due 31 January 2027, remains under the old Self Assessment penalties, because the new regime starts with the year you join.

Volunteers are treated differently. While volunteering, late quarterly updates attract no penalties at all, but late tax returns earn points against a threshold of 2 rather than 4. Someone who agrees to the new penalties when volunteering cannot later switch back to the old ones.

There is a separate first year concession for late payment. In the first year under the new penalties, no late payment penalty arises if you pay in full or agree a payment plan within 30 days of the due date; after that the window is 15 days. Late payment penalties are not points based.

When is the £200 penalty charged?

Once you hold 4 points, the threshold under the HMRC guidance, a £200 penalty is charged. Every further missed deadline while you remain at the threshold brings another £200 penalty, but no further points, because paragraph 5(8) stops you gaining points beyond the maximum.

Points for Making Tax Digital for Income Tax are counted separately from any points you hold for VAT. A sole trader who is also VAT registered could have 4 Income Tax points and none for VAT, or the reverse. The VAT side is covered in VAT penalty points.

How do points expire or get cleared?

Below the threshold, each point expires automatically. HMRC’s guidance says this happens 24 months after the missed deadline. Paragraph 7 of Schedule 24 is more precise: the period of 24 months begins with the first day of the month after the month in which the failure happened.

At the threshold, individual points do not expire. All points are removed only when you have both:

  • sent your quarterly updates and tax returns on time for 12 months, and
  • sent any outstanding quarterly updates and tax returns due in the previous 24 months.

HMRC may also cancel a point or penalty in exceptional circumstances such as insolvency. Your HMRC online account shows the date each point will be removed.

What happens if you become exempt?

If you become exempt during 2026 to 2027 you return to the old Self Assessment penalties. From April 2027 HMRC says the new penalties will apply to everyone filing a personal Self Assessment return, so someone who becomes exempt in 2027 to 2028 stays in the points regime but with a threshold of 2. Existing points are reduced so you are no closer to the new threshold: 3 points, which is 1 short of 4, become 1 point, which is 1 short of 2. The exemptions themselves are explained in who is exempt from MTD for Income Tax.

How might points build up?

Illustration only. Leila, a landlord, joined MTD on 6 April 2026 and uses standard periods.

Deadline missed Result Points held
7 November 2026 (update) No point in 2026 to 2027 0
7 August 2027 (update) 1 point 1
31 January 2028 (2026 to 2027 return) 1 point 2
7 February 2028 (update) 1 point 3
7 May 2028 (update) 1 point and £200 penalty 4
7 August 2028 (update) £200 penalty 4

Without the last two failures, her August 2027 point would have expired at the end of August 2029. Because she reached 4, she now needs 12 months of on time submissions, with everything from the previous 24 months filed, before all four points are wiped.

Can you appeal a point or a penalty?

Yes. Under paragraph 19 of Schedule 24 no point or penalty arises if you satisfy HMRC, or a tribunal, that you had a reasonable excuse. Lack of funds is not an excuse unless caused by events outside your control. Relying on someone else, such as an agent, is not an excuse unless you took reasonable care to avoid the failure; see relying on an adviser. Paragraph 22 gives a right of appeal against both points and penalties. HMRC writes to you each time it awards a point or charges a penalty, and the letter explains how to appeal.

What mistakes cause avoidable penalties?

  • Treating the 2026 to 2027 concession as a reason to stop sending updates, then being unable to file the return on time.
  • Assuming points from the first late return will have expired before quarterly points start in 2027 to 2028.
  • Forgetting that at 4 points a single missed deadline costs £200 each time.
  • Ignoring a missed update from the previous 24 months, which blocks the reset even after a year of compliance.

For a comparison with other HMRC regimes, see the HMRC penalties table.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.