MTD Penalty Points Explained 2026: Late Update & Payment Fines
Last updated 18 June 2026 · 8 min read · By the LandlordTaxAi Editorial Team
The short answer
Under Making Tax Digital for Income Tax you get one penalty point each time you miss a submission deadline. For landlords filing quarterly, reaching four points triggers a £200 penalty, with another £200 for every late submission after that. Late payment is penalised separately: nothing if you pay within 15 days, 3% of the tax outstanding at day 15 if you are 16–30 days late, and at 31+ days a further 3% plus a penalty accruing at 10% a year until you pay. This guide explains exactly how the system works and how to stay clear of it. HMRC's official penalties guidance is at gov.uk.
Two separate penalty systems, not one
The most common confusion about MTD penalties is treating them as a single fine. They are two entirely separate systems that can apply at the same time:
- Late submission penalties use a points system and apply when you miss a deadline to file a quarterly update or final declaration — regardless of whether any tax is due.
- Late payment penalties are percentage charges that apply when you pay your tax late, based on how many days late you are.
You can incur points without owing a penny, and you can incur late-payment penalties even if every submission was on time. Understanding both is the only way to stay fully compliant.
Late submission: how the points system works
Every time you miss a submission deadline, HMRC adds one penalty point to your record. Points are counted by submission frequency, and because MTD landlords file four quarterly updates a year, the threshold that matters is the quarterly one.
| Submission frequency | Points threshold | Penalty at threshold |
|---|---|---|
| Annual | 2 points | £200 |
| Quarterly (MTD landlords) | 4 points | £200 |
| Monthly | 5 points | £200 |
Once you reach four points, HMRC charges a flat £200 penalty. While you remain at the threshold, every further late submission adds another £200 — so a landlord who keeps missing deadlines can rack up £200 charges one after another. The points and the penalties are not linked to the size of your tax bill; they are about filing on time.
The four quarterly deadlines are fixed every year: 7 August, 7 November, 7 February and 7 May, with the final declaration due by 31 January. For the full schedule see our MTD quarterly deadlines 2026 guide.
How penalty points expire and reset
Points are not a life sentence. If you are below the threshold, each individual point expires automatically two years after it was issued (measured from the month after the late submission).
Once you have reached the threshold, individual points stop expiring. Instead, your whole points total resets to zero only when you meet both of these conditions:
- You submit every update and declaration on time for a continuous period of compliance (12 months for quarterly filers).
- You have submitted all returns that were due in the previous 24 months, even if some were late.
In practice this means a single missed deadline is recoverable, but repeated lateness is expensive and slow to clear.
Never miss a quarterly deadline
LandlordTaxAi prepares each quarterly update from your bank statements and reminds you before every deadline — so points never start adding up. From £19/month.
Start your free trialLate payment penalties: the reformed rates
Paying your tax late is penalised under a separate, harsher regime that escalates the longer the tax stays unpaid. The penalty is a percentage of the outstanding tax, not a fixed sum.
| How late the payment is | Penalty |
|---|---|
| Up to 15 days | No penalty |
| 16 to 30 days | 3% of the tax outstanding at day 15 |
| 31 days or more | 3% at day 15 + 3% at day 30, then 10% a year accruing daily |
On top of the penalties, HMRC charges late-payment interest on the overdue tax from the due date until it is paid. A landlord who leaves a £4,000 balancing payment unpaid for two months therefore faces a 3% penalty (£120), a further 3% penalty (£120), a daily-accruing 10%-a-year penalty, and interest — quickly turning a cash-flow slip into a meaningful cost.
If you cannot pay on time, contact HMRC and set up a Time to Pay arrangement before the penalties bite — agreeing a payment plan can stop further late-payment penalties from accruing.
How to avoid MTD penalties entirely
- Keep records digital and current.The biggest cause of late updates is a quarter's worth of receipts left until the deadline. Importing bank statements as you go removes the crunch.
- Diarise the four dates. 7 August, 7 November, 7 February, 7 May — every year.
- Use reminders. Software that nudges you a week before each deadline prevents the first point ever landing.
- Budget for the 31 January payment. Set aside tax through the year so the balancing payment never goes unpaid.
- Appeal genuine reasonable excuses. If you missed a deadline for a genuine reason — serious illness, bereavement, software failure — you can appeal the point or penalty.
For the wider picture of your obligations, read our Making Tax Digital for landlords guide and our guide to choosing MTD software for landlords.
Frequently asked questions
How do MTD penalty points work?
Under Making Tax Digital for Income Tax, you receive one penalty point each time you miss a submission deadline — whether that is a quarterly update or your final declaration. Points accumulate separately from financial penalties. When you reach the points threshold, which is four points for landlords filing quarterly, HMRC charges a £200 penalty. After reaching the threshold, every further late submission triggers another £200 penalty. Points are not permanent: they expire after a set period, and the whole total can reset to zero once you meet all your deadlines for a continuous period of good compliance.
How many penalty points before I get a fine under MTD?
For landlords submitting quarterly updates, the threshold is four penalty points. You reach it by missing four submission deadlines. At four points HMRC issues a £200 penalty. Each additional late submission after that adds a further £200 penalty while you remain at the threshold. The threshold differs by filing frequency: it is two points for annual filers and five points for monthly filers, but four points applies to the standard quarterly MTD landlord.
What are the late payment penalties under MTD for Income Tax?
Late payment penalties are separate from late submission points and are based on how late the tax is paid. If you pay within 15 days of the due date there is no penalty. If you pay between 16 and 30 days late, the first penalty is 3% of the tax outstanding at day 15. If you are 31 days or more late, you are charged 3% of the tax owed at day 15 plus a further 3% of the tax owed at day 30, and a second penalty then accrues daily at an annual rate of 10% from day 31 until you pay. Interest is also charged on top.
Do quarterly updates trigger a tax payment?
No. Quarterly updates are summaries of your income and expenses and do not create a payment demand. Your Income Tax for the year remains payable by 31 January following the tax year, with payments on account in July where they apply. The late-payment penalties apply to that 31 January balancing payment and any payments on account — not to the quarterly updates themselves.
Do MTD penalty points expire?
Yes. Individual penalty points expire automatically after two years, measured from the month after the month in which the late submission occurred — provided you have not reached the threshold. Once you reach the threshold and start receiving £200 penalties, the points do not expire individually; instead the whole points total resets to zero only after you meet two conditions: you submit everything on time for a set period of compliance, and you have submitted all outstanding returns due in the previous 24 months.
Is there a soft-landing period for MTD penalties in 2026?
HMRC has indicated a supportive approach in the first year of mandation, but the points-based penalty framework applies from the start of MTD for Income Tax. The safest assumption is that penalties can apply from your first quarterly update, so you should not rely on leniency. The reformed late-payment penalty regime — 3% at day 15, a further 3% at day 30, and 10% a year from day 31 — applies to late tax payments. Always check the current position on HMRC's penalties guidance page before relying on any easement.
LandlordTaxAi Editorial Team
The LandlordTaxAi editorial team writes about UK landlord tax, HMRC compliance, and Making Tax Digital. Our content is reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 18 June 2026 · Penalty rules correct as at 18 June 2026, based on HMRC guidance. This article is informational only and does not constitute tax advice. Consult a qualified accountant for advice on your specific circumstances.