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.
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
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Most important misunderstanding: Many taxpayers believe the soft landing is a full amnesty for 2026–27. It is not. It only suspends the quarterly submission penalty points mechanism. Everything else — payment interest, Final Declaration penalties, registration obligations — applies from day one of mandation on 6 April 2026.
Late payment interest — separate from penalty points
Even if you never receive a single penalty point, unpaid tax accrues interest. The current HMRC late payment interest structure:
Days 1–15 after due date0% — no charge
Day 16 onwards3% surcharge on unpaid amount
Day 31 onwardsFurther 3% + 10% per annum daily interest
6 months lateAdditional 2% penalty
12 months lateFurther 2–10% (behaviour-based)
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
Points do not last forever — but the reset conditions are strict:
You must achieve 24 consecutive months of full compliance after your qualifying income drops below the mandatory threshold
All outstanding returns must be filed before the clock starts
If you remain above the threshold, points do not automatically expire
The practical implication: if your income fluctuates around the threshold, points from non-compliant years may persist even in years you are not technically mandatory. File everything on time to prevent accumulation.
Frequently asked questions
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.
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.
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. The Final Declaration also triggers your tax liability — late filing means late payment interest on any tax owed.
No — not without formal HMRC confirmation. You must notify HMRC that your qualifying income has fallen below the threshold and wait for written confirmation to exit MTD. Continuing to file while awaiting confirmation is the correct approach. Do not simply stop — unilateral cessation of MTD submissions is non-compliance.
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