MTD Soft Landing for Landlords: The 2026/27 Penalty Grace Period Explained
Last updated 24 June 2026 · 9 min read · By the LandlordTaxAi Editorial Team
The short answer
Landlords mandated into Making Tax Digital for Income Tax from 6 April 2026 (income over £50,000) will not receive penalty points for late quarterly updates for the first 12 months. Late-payment penalties are also relaxed: new joiners get 30 days before charges start in year one, instead of the usual 15.
Making Tax Digital for Income Tax (MTD for ITSA) is the biggest change to landlord tax admin in a generation, and it starts for the first wave — anyone with qualifying income over £50,000 — on 6 April 2026. The good news HMRC doesn’t shout about: the first year comes with a deliberate "soft landing" so you can get used to quarterly updates without being punished for early slip-ups.
This is not a free pass to ignore the rules. The obligation to keep digital records and file four quarterly updates still applies from day one. What changes is the consequence of getting the timing wrong while you learn. Below is exactly what is waived, what is not, and how to use the grace period properly.
If you’re still working out whether you’re even in scope, start with how to register for MTD for Income Tax and check your number against the £30,000 threshold for April 2027.
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MTD Soft-Landing Date Checker
Enter your gross rental and trade income to see which year you're mandated — and when your penalty soft landing applies.
Result
- Total qualifying income
- £28,000
- You must use MTD for Income Tax
- From 6 April 2028
Based on qualifying-income thresholds: £50k (Apr 2026), £30k (Apr 2027), £20k (Apr 2028).
What the soft landing actually covers
HMRC has confirmed two separate relaxations for people who join MTD for Income Tax in April 2026. They are easy to confuse because they both sound like "penalties", but they work differently and apply to different things.
The first relaxation is on late-submission penalty points for quarterly updates. The second is on late-payment penalties for tax you owe. You can benefit from both in your first year.
| Relaxation | Normal rule | Year-one soft landing (Apr 2026 joiners) |
|---|---|---|
| Late quarterly update | 1 penalty point each miss; £200 at 4 points | No penalty points for the first 12 months |
| Late tax payment | Charges start after 15 days late | Charges start after 30 days late |
| Digital record-keeping | Mandatory from 6 Apr 2026 | Mandatory — not relaxed |
| Final declaration (31 Jan) | Standard Self Assessment penalties apply | Not part of the soft landing |
The soft landing applies to quarterly updates and late payment only. Your final declaration — the replacement for the old tax return, due by 31 January — is not covered. Miss that and normal Self Assessment penalties bite.
How the penalty-points system works once the grace period ends
Understanding what you’re being spared helps you respect the deadline anyway. From your second year onward, MTD uses a points-based late-submission regime rather than an automatic fine for each miss.
You collect one point every time a quarterly update or final declaration is late. When you reach the threshold of 4 points, you get a £200 penalty — and a further £200 every time you’re late after that. If you stay below the threshold, each point is automatically wiped 24 months after the deadline you missed.
- Threshold to trigger a fine: 4 points
- Fine at the threshold: £200, then £200 per further late submission
- Points expire automatically 24 months after the missed deadline (if you’re below threshold)
- Two or more businesses (e.g. property + sole trade) accrue a maximum of one point per submission period
We cover the mechanics in full in MTD penalty points explained — worth reading before April 2027 when the grace period is gone.
Late-payment penalties: the 30-day year-one cushion
Paying late is treated separately from filing late. For 2026/27, the standard rules are: nothing for the first 15 days, then a first late-payment penalty if tax is still unpaid, then a second, escalating charge the longer it runs.
New joiners get a one-off extension in year one: penalties only start to apply after 30 days rather than 15. From your second year this reverts to 15 days, so don’t build a habit around the longer window.
| How late the payment is | 2026/27 charge |
|---|---|
| Up to 15 days (30 for year-one joiners) | No late-payment penalty |
| 16–30 days | 3% of the tax outstanding at day 15 |
| 31 days or more | A further 3% at day 30, plus interest at a daily rate (≈10% a year) until paid |
Late-payment interest is never waived by the soft landing. It accrues daily from the due date, so pay as soon as you can even if no penalty has kicked in yet.
How to actually use the grace period (don’t waste it)
The smartest landlords treat 2026/27 as a free rehearsal: they file every quarterly update on time anyway, using the no-penalty window only as a safety net. That way you enter April 2027 — when the grace period ends and the £30,000 cohort joins — already fluent.
Who is — and isn’t — in the first soft-landing wave
The 12-month waiver is tied to when you become mandated, not the calendar. The April 2026 cohort (over £50,000) gets it across 2026/27. The April 2027 cohort (over £30,000) gets their own 12-month soft landing across 2027/28, and so on for the April 2028 group (over £20,000).
"Qualifying income" is your gross rental and self-employment turnover combined — before expenses, before Section 24, before the mortgage. A landlord with £40,000 rent and £15,000 from a side trade is over £50,000 and in from April 2026, even if their taxable profit is far lower.
If you’re close to a threshold, the £20,000 April 2028 cohort guide and the calculator above show exactly when you’re pulled in.
Walk into MTD ready, not rattled
LandlordTaxAi keeps your digital records compliant from day one and files every quarterly update on time — so the soft landing stays a safety net you never need.
See how it worksA worked example
Sara, a landlord with £58,000 of rental turnover, is mandated from 6 April 2026 and misses her first two quarterly updates while learning the software.
| Q1 update (due 7 Aug 2026) — late | 0 penalty points (soft landing) |
| Q2 update (due 7 Nov 2026) — late | 0 penalty points (soft landing) |
| Same misses from April 2027 onward | 1 point each — 4 points = £200 fine |
| Tax paid 20 days late in year one | No penalty (30-day cushion), but interest accrues |
In 2026/27 Sara pays nothing for the late updates. The identical behaviour a year later would put her two-thirds of the way to a £200 fine — which is exactly why the rehearsal year matters.
Frequently asked questions
Do I still have to file quarterly updates in 2026/27 if there’s no penalty?
Yes. The legal obligation to keep digital records and submit four quarterly updates applies from 6 April 2026. Only the penalty points for late updates are waived for the first 12 months.
Does the soft landing cover my final declaration?
No. The final declaration (the MTD replacement for the Self Assessment tax return, due 31 January) is outside the soft landing. Normal late-filing penalties apply.
How long does the late-payment grace last?
In year one, late-payment penalties start after 30 days instead of 15. From your second year it reverts to 15 days. Interest is never waived.
What happens to penalty points after the grace period?
You get one point per late submission. At 4 points you’re fined £200, then £200 each further miss. Points are removed automatically 24 months after the missed deadline if you stay below the threshold.
Is the £50,000 threshold based on profit or turnover?
Turnover. It’s your gross combined self-employment and property income before any expenses or reliefs. Use the calculator above to check.
Do April 2027 joiners get a soft landing too?
Yes. Each new cohort gets its own 12-month penalty-point waiver in its first mandated year — April 2027 for the over-£30,000 group, April 2028 for over-£20,000.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 24 June 2026 · Researched against primary UK sources for the 2026/27 tax year: https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax; https://www.gov.uk/government/publications/penalty-reform-for-making-tax-digital-for-income-tax-self-assessment-volunteers/making-tax-digital-volunteers-and-penalties; https://www.gov.uk/government/news/act-now-864000-sole-traders-and-landlords-face-new-tax-rules-in-two-months; https://www.litrg.org.uk/tax-nic/making-tax-digital-income-tax/making-tax-digital-penalties. This article is informational only and does not constitute tax advice. Check the latest details on GOV.UK or with a qualified accountant.