When a client joins MTD IT, HMRC's new penalties replace the old Self Assessment penalties for their personal tax return, from the tax year they join. This is a quick reference for the deadlines you manage in Capium. GOV.UK is the authoritative source and is linked at the foot.
| Does not apply to: non-resident company, trust or estate, and partnership returns. These keep the current Self Assessment penalties. |
Key Deadlines
- Quarterly updates: 7 August, 7 November, 7 February, 7 May
- Final Declaration and payment: 31 January after the tax year ends
Late Submission Penalties (Points Based)
- One point per missed quarterly update or Final Declaration deadline.
- Threshold is four points. At four points: a £200 penalty, plus £200 for every further missed deadline.
- MTD IT points are separate from VAT points.
- First year easement: no points for late quarterly updates in the 2026 to 2027 tax year. Updates must still be filed before the Final Declaration. The easement does not cover the 2026 to 2027 Final Declaration itself.
Clearing points:
- Below four points: each point drops off automatically 24 months after the missed deadline.
- At four points: file on time for 12 months and submit any outstanding returns for the previous 24 months to clear them all.
To remove all your penalty points you need to:
- send your quarterly updates and submit your tax return on time for 12 months
- send any outstanding quarterly updates and submit any outstanding tax returns for the previous 24 months
- If you file annually : once you reach the threshold of 2 penalty points, a £200 financial penalty is issued
Late Payment Penalties (Per Payment)
Not points based. Charged on each late payment, and they grow the longer tax is unpaid. They apply to the balancing payment and to amounts due after an amendment or assessment, but not to payments on account.
| How late | 2026 to 2027 | 2027 to 2028 |
|---|---|---|
| Up to 15 days | No penalty | No penalty |
| 16 to 30 days | 3% of tax owed at day 15 | 4% of tax owed at day 15 |
| 31 days or more | 3% at day 15, plus 3% at day 30, plus 10% a year charged daily from day 31 (up to 2 years) | 4% at day 15, plus 4% at day 30, plus 10% a year charged daily from day 31 (up to 2 years) |
- First year only: 30 days from the due date to pay or set up a payment plan before penalties start. After that, it is 15 days.
- Late payment interest is charged from day one, on top of any penalty.
- Setting up a Time to Pay arrangement pauses penalties from the date HMRC is contacted.
Digital Records Penalty
HMRC can charge up to £3,000 per quarter where a client does not keep their records digitally in compatible software. Keeping clients in the Capium MTD IT workflow keeps these records in the required format.
If a Client Becomes Exempt
- Exempt in 2026 to 2027: back to the current Self Assessment penalties.
- Exempt in 2027 to 2028: stays on the new penalties, and the points threshold drops from four to two.
Appeals
HMRC writes to the client for each point, each £200 penalty and each late payment penalty. A reasonable excuse can prevent a point or penalty, and there is a right of appeal. The letter explains how.
Authoritative Guidance
- GOV.UK: https://www.gov.uk/guidance/penalties-for-making-tax-digital-for-income-tax
- ICAEW Tax Faculty: https://www.icaew.com/technical/tax/making-tax-digital/mtd-for-income-tax-penalties
Where sources differ, GOV.UK takes precedence.