MTD Penalty Points 2026 —
Exact Costs and How to Avoid Them
MTD uses a points-based late submission penalty system — different from the old fixed penalty system under Self Assessment. Understanding exactly how it works helps you understand what is genuinely at risk and what the soft landing actually protects you from.
How the points system works: step by step
Each time you miss a quarterly submission deadline, HMRC issues one penalty point. Points accumulate independently. When you hit four points, HMRC automatically issues a £200 fine. Every further missed submission after that adds another £200 — immediately, without waiting for more points.
The full penalty progression table
| Missed submissions | Points total | Cumulative fines | Status |
|---|---|---|---|
| 0 | 0 | £0 | Compliant |
| 1 | 1 | £0 | 1 point. No fine |
| 2 | 2 | £0 | 2 points. No fine |
| 3 | 3 | £0 | 3 points — one miss away from fine |
| 4 | 4 | £200 | Threshold hit, £200 fine issued |
| 5 | 5 | £400 | +£200 per further miss |
| 8 | 8 | £1,000 | Persistent non-compliance |
| 12 | 12 | £1,800 | Serious non-compliance |
Source: HMRC: MTD penalty guidance ↗
The soft landing, what it actually covers
HMRC confirmed a soft landing for Phase 1 taxpayers (£50,000+) during 2026–27. During this year, no penalty points are issued for late quarterly submissions. This means you cannot accumulate the four points needed to trigger the £200 fine during 2026–27 — even if you miss all four quarterly deadlines.
However, three critical things are not covered by the soft landing:
- Late payment interest — applies from day one on unpaid tax, regardless of the soft landing
- The Final Declaration — miss the 31 January 2028 deadline and you receive a real penalty point
- Phase 2 and 3 taxpayers. No soft landing exists for those joining in April 2027 or April 2028
Late payment interest, separate from penalty points
Late payment is penalised separately from missed submissions, and interest is charged on top. HMRC's late payment penalties for tax relating to 2026–27 (balancing payments, not payments on account):
Note: Quarterly updates do not themselves trigger payments. Tax becomes due with your Final Declaration. But if you have payments on account and underpay, interest runs from the original payment on account dates.
How to reset your penalty points
HMRC's rules for removing penalty points:
- Below the 4-point threshold: each point is removed automatically 24 months after the missed deadline.
- At the threshold: points are not removed one by one. You must submit on time for 12 months and send all outstanding quarterly updates and tax returns for the previous 24 months to clear them all.
- Your HMRC online services account shows the date each point will be removed.
The practical implication: file every quarterly update and your tax return on time. In 2026–27 late quarterly updates earn no points, but a late tax return does.
Frequently asked questions
Do penalty points carry over from 2026–27 to 2027–28?
No — the soft landing means no points are issued during 2026–27 for quarterly submissions. So there are no points to carry over. You start 2027–28 with zero points and full penalties in force. Any late submission from 7 August 2027 onwards immediately earns a live point.
I missed my Q1 deadline — what do I do now?
Submit as soon as possible. During 2026–27, the soft landing means no penalty points for late quarterly updates, so there is no fine for lateness this year. But you should still submit: HMRC expects compliance, and not filing at all is more serious than filing late. Set up your software and submit Q1 even if late. Q2 is due 7 November — do not miss it too.
Is there a penalty for missing the Final Declaration?
Yes. The Final Declaration (due 31 January 2028 for the 2026–27 tax year) is not covered by the soft landing. Miss it and you receive one penalty point under the full penalty regime. Late payment penalties and interest apply to any tax paid late.
My income dropped below £50k, can I stop filing?
Possibly, but not straight away. HMRC works out whether you must use MTD from the qualifying income on your Self Assessment return. Once you are using the service, you can choose to opt out if your qualifying income stays below the threshold for 3 tax years in a row. If you amend your return after the start of a tax year so that qualifying income falls below the threshold, you do not need to use MTD for that tax year. Until then, keep sending your quarterly updates.
Check your full MTD position
Readiness score, penalty exposure, deadlines and software recommendation, free, in 60 seconds.
Run My Free MTD Check →