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Guide · Penalties and exemptions

MTD penalties and exemptions

The short answer

Making Tax Digital uses penalty points. Each missed deadline earns a point, and at 4 points you pay £200, plus £200 for every later miss. There are no penalties for late quarterly updates in 2026 to 2027. You are exempt if your qualifying income is £20,000 or less, and you can apply if you cannot reasonably use software.

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4 points

triggers a £200 penalty, then £200 for each further miss

£200
penalty at 4 points
24 months
before a point below the threshold expires
15 days
of late payment before any penalty
£20,000
or less of qualifying income is exempt

Late submission

How penalty points work

You get one point for each missed quarterly update or tax return deadline, and only one point per deadline even if you have several businesses. At 4 points you pay a £200 penalty, and another £200 for every deadline you miss after that.

Points below the threshold drop off 24 months after the missed deadline. Once you reach 4, you clear them by meeting every deadline for 12 months and sending anything outstanding from the previous 24 months.

The easement

No points for late quarterly updates in 2026 to 2027

For the 2026 to 2027 tax year, missing a quarterly update deadline brings no penalty. You must still keep digital records and send every update before you submit your tax return, and late returns and late payment are still penalised. Points for late quarterly updates start with the 2027 to 2028 tax year, the same year the £30,000 group joins.

Late payment

Late payment penalties

Days late2026 to 20272027 to 2028
Up to 15 daysNo penaltyNo penalty
16 to 30 days3% of the tax owed at day 154% of the tax owed at day 15
31 days or more3% at day 15, 3% at day 30, then 10% a year4% at day 15, 4% at day 30, then 10% a year

In your first year under the new rules, nothing is charged until day 30. The 10% yearly rate runs daily from day 31 on the amount still owed. Late payment interest is charged as well, from the first day the tax is late.

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Never miss a deadline

An accountant tracks every update and return date for you and sends them on time. We will match you with up to 4 local Making Tax Digital accountants.

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Exemptions

Who is exempt from MTD

  • Qualifying income of £20,000 or less: exempt automatically.
  • No National Insurance number before the start of the tax year: exempt automatically.
  • Partnerships: not required to use MTD for Income Tax at the moment.
  • Trusts, personal representatives of someone who has died, and some non-resident companies: exempt.
  • Digitally excluded: you can apply if age, health, disability, religious belief or no internet access means using software is not reasonable.

HMRC will not accept being unfamiliar with software, having few records, a previous paper return, or the extra time or cost as your only reason. Not sure if you are in at all? Use our MTD checker.

A restaurant owner standing in his dining room

The dates that matter

  1. 6 Apr 2026Started for qualifying income over £50,000 (2024-25 return)
  2. 7 Nov 2026Second quarterly update due for the April 2026 group
  3. 6 Apr 2027Starts for qualifying income over £30,000 (2025-26 return). Penalty points for late quarterly updates begin
  4. 7 Aug 2027First quarterly update due for the April 2027 group
  5. 31 Jan 2028First MTD tax return and payment due for 2026-27
  6. 6 Apr 2028Starts for qualifying income over £20,000 (2026-27 return)

Questions people ask

MTD penalties and exemptions: your questions

What is the penalty for missing an MTD deadline?

Each missed deadline earns a penalty point. At 4 points you pay £200, and another £200 for each later missed deadline. Source

Is there a grace period for MTD penalties?

Yes. There are no penalties for missing a quarterly update deadline in the 2026 to 2027 tax year, but every update must still be sent before you submit your tax return. Source

How long do penalty points last?

Points below the threshold are removed 24 months after the missed deadline. At the threshold, you clear them by meeting every deadline for 12 months and sending anything outstanding. Source

Do I get a point for each business?

No. You get only one point per deadline, even if you have several businesses. Source

Who is exempt from Making Tax Digital?

People with qualifying income of £20,000 or less, people without a National Insurance number before the tax year starts, partnerships for now, and some trusts and representatives. Others can apply if they are digitally excluded. Source

Can I get an exemption because I find software hard?

Not on that basis alone. HMRC will not accept being unfamiliar with software, or the extra time or cost, as your only reason. Source

Guides

MTD for Income Tax explainedWho is in, the dates, quarterly updates and what it costs.Making Tax Digital for the self-employedWhat changes for sole traders from April 2027.Making Tax Digital for landlordsRental income, joint ownership and overseas property.Self-employed tax calculatorHow much tax and NI to set aside each quarter.Self-employed mileage calculatorThe 55p rate or actual costs: which claims more.MTD deadline calendarEvery update and payment date, added to your calendar.Do I need to use Making Tax Digital?Check your qualifying income and start date.MTD software or an accountant?Software, spreadsheets and bridging tools compared.How to sign up for Making Tax DigitalSigning up yourself, or letting an accountant do it.Accountants for small businessWhat they do, what to ask and what they cost.MTD for builders and CIS subcontractorsHomeowner and contractor work, CIS and the reverse charge.MTD for plumbers and electriciansDeposits, van stock, scheme fees and card payments.MTD for taxi and delivery driversSeveral apps, platform reports and car costs.MTD for hair and beautyRent-a-chair, tips, products and mobile work.MTD for cleaners and carersMany small clients and travel between them.

Sources

Written by the Compare Advantage team, Chorley. Facts checked against GOV.UK on 3 November 2026.

Compare Advantage is an introduction service. We are not an accountancy firm and do not give tax advice. We will contact you to introduce a local accountant who handles Making Tax Digital, and we tell you which firm before we pass on your details. Firms may pay us for the introduction. Guidance on this page is general and based on the GOV.UK sources linked on each page.