The new points-based penalties system will apply to all self assessment taxpayers from April 2027, not just those within Making Tax Digital for income tax (MTD IT).
The new rules will apply first to taxpayers mandated to join MTD IT from April 2026 (those with qualifying income over £50,000); then to those required to join from April 2027 (qualifying income over £30,000). It was announced at Autumn Budget 2025 that the new regime will then apply to all income taxpayers, regardless of MTD IT status, from April 2027.
Points mean penalties
Under MTD IT, individuals will be required to file quarterly updates summarising their income and expenses. The deadlines for submitting quarterly updates are 7 August; 7 November; 7 February; and 7 May.
If you miss a submission deadline you will receive a penalty point. Once you have accumulated four penalty points you will receive a £200 penalty. For taxpayers filing annually (ie those outside the scope of MTD IT) the financial penalty will be triggered at two penalty points (ie two late annual returns).
Provided your points remain below your relevant threshold (fewer than four points for MTD IT) they will automatically expire after two years. Once you reach the threshold and incur the £200 penalty, subsequent late filings will not result in additional points but will instead trigger an immediate £200 penalty.
To reset your penalties to zero once you have reached the threshold you must complete a ‘period of compliance’ which requires filing a full year of submissions on time – four timely quarterly submissions for MTD IT, or two timely annual returns for those outside of MTD IT.
The good news is that for the first year of MTD IT no penalty points will be awarded for late quarterly updates. This applies only to the 2026-27 tax year, not to an individual’s first year of MTD IT. Therefore, if you join MTD IT in 2027-28 because your qualifying income exceeds £30,000, penalty points will apply from your first quarterly update.
Late payment
Under the current self assessment system, if you pay your tax liability after the deadline you have a 30-day window to make payment without incurring a penalty. The new regime reduces that window to 15 days. Penalties will be charged on a sliding scale depending on when payment is made:
- · day 15: 3% of tax outstanding*
- · day 30: a further 3% of the tax outstanding*
- · day 31 onwards: a daily penalty at 10% per annum.
*increasing to 4% from April 2027.
Late-payment interest will also apply to the outstanding balance. If you are unable to meet your income tax obligations on time, you can avoid penalties (but not interest) by setting up a Time to Pay arrangement with HMRC. We can help you with that.
