Making Tax Digital
Making Tax Digital penalties: points and late payment
Late filing now costs points before it costs money; late payment costs more the longer it runs.
A sole trader in Making Tax Digital who pays a £5,000 2026/27 balancing payment 45 days late owes a late payment penalty of £321: 3 % at day 15, 3 % at day 30 and a yearly 10 % charged day by day from day 31, with late payment interest on top. In the first MTD year nothing is charged if the tax is paid, or a payment plan agreed, within 30 days; after that the grace shrinks to 15 days. For 2027/28 payments the two steps rise to 4 % each. Late returns and, from the year after 2026/27, late quarterly updates earn one point per missed deadline; at 4 points a £200 penalty follows, and another for each further miss. Payments on account sit outside the late payment penalty. Enter the amount, the delay and the year to see the charge.
Late payment penalty under Making Tax Digital
Penalty
£321
| Day 15 charge | £150 |
| Day 30 charge | £150 |
| Yearly rate from day 31 | £21 |
| Old Self Assessment rules, same delay | £250 |
Late payment interest is charged on top, at the Bank of England base rate plus 4 %.
Figures checked by Radif Partners · Editorial policy · How we calculate
Points for missed submissions
The submission side works like a driving licence. Each missed deadline, whether a tax return or (after 2026/27) a quarterly update, adds a point, and nothing is payable until the total reaches 4. A one-off slip by a busy decorator therefore costs nothing in cash. Two businesses with late updates for the same quarter still bring only one point, because points attach to the deadline, not to each submission. Points under MTD for VAT are kept on a separate tally.
At the threshold, a £200 penalty is charged, then the same again for each later miss. Points under the threshold disappear 24 months after the missed date. Points at the threshold do not; you clear them by keeping every deadline for twelve months and filing anything still outstanding, after which the count goes back to zero.
What a late payment costs
The payment penalty covers balancing payments and tax due after an amendment or assessment. It does not cover payments on account. The table shows the penalty alone, before interest, on £4,000 of tax.
| Paid late by | 2026/27, first MTD year | 2026/27, later year | 2027/28 |
|---|---|---|---|
| 10 days | £0 | £0 | £0 |
| 20 days | £0 | £120 | £160 |
| 31 days | £241 | £241 | £321 |
| 60 days | £273 | £273 | £353 |
| 120 days | £339 | £339 | £419 |
| 365 days | £607 | £607 | £687 |
The annual element, 10 % a year on what is still unpaid, starts on day 31 and stops when the tax is cleared, or after 2 years. HMRC’s penalty guide, updated in March 2026, sets the two fixed steps at 4 % for 2027/28 rather than 3 %. Late payment interest is a separate charge, running from the first day late at HMRC’s published rate.
Outside MTD, £4,000 paid 60 days late draws a £200 penalty under the Self Assessment rules. Inside MTD, after the first year, the same delay costs £273. That is £73 more: by then both percentage steps have applied and the daily charge has been running for a month.
Which year falls under which rules
The new penalties start with your first MTD tax year. Someone who joined on 6 April 2026 is still under the old regime for the 2025/26 return due on 31 January 2027, with its £100 late filing charge. The 30-day grace is given only once: a volunteer who later becomes a required user keeps the 15-day limit.
Paying in instalments and appealing
If you cannot pay, call HMRC early. Once a payment plan is agreed and kept, penalties are paused from the day you made contact; they come back if no plan can be agreed or the instalments stop. HMRC writes for each point, each £200 charge and each payment penalty, and the letter explains how to appeal. In exceptional cases such as insolvency, HMRC can cancel penalties or points.
Exempt part-way, or volunteering
Becoming exempt during 2026/27 sends you back to the old Self Assessment penalties. From 2027/28 the new system applies to everyone filing a personal return, so an exemption that year keeps you in it with a lower threshold of 2 points, and existing points are cut so that you are no nearer the limit than before. A volunteer is never penalised for a late quarterly update, but late returns count towards the same 2-point limit.