MTD penalty points for 2026 to 2027: what landlords and sole traders really face

Many landlords and sole traders who started Making Tax Digital for Income Tax in April 2026 expect a penalty point every time a quarterly update is late. For the 2026 to 2027 tax year, that is not how it works. Here is what HMRC will and will not penalise this year, how penalty points work from April 2027, and how you can check your own points.

Unless stated otherwise, this article covers landlords and sole traders required to use Making Tax Digital for Income Tax from April 2026. Volunteers have their own rules, covered further down.

The short answer

• Late quarterly updates: HMRC's guidance says "There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year."
• You still have to send them: you must keep digital records and send your quarterly updates before you can submit your tax return.
• Your tax return still counts: the easing does not cover your 2026 to 2027 tax return, which is due by 31 January 2028. If it is late, it earns a penalty point.
• Late payment still counts: paying your tax late can bring late payment penalties.
• Your 2025 to 2026 return is under the old rules: it is due by 31 January 2027, and the current Self Assessment penalties apply to it.

The main penalty rules below are explained in HMRC's guidance on penalties for Making Tax Digital for Income Tax, last updated 30 March 2026.

When the new penalties start for you

The new penalties replace the current late submission and late payment penalties for your personal tax return from the tax year you join Making Tax Digital for Income Tax. If you joined on 6 April 2026, they apply from the 2026 to 2027 tax year.

Earlier tax years stay under the current penalties. That means your 2025 to 2026 tax return, due by 31 January 2027, is still covered by the current Self Assessment penalties, including a £100 penalty if it is late.

The new penalties do not apply to partnership, trust or estate, or non-resident company returns.

Quarterly updates in 2026 to 2027

There is no penalty for a late quarterly update in the 2026 to 2027 tax year. That does not make the updates optional. HMRC still expects you to keep digital records and send every quarterly update, and they have to be in before you can submit your tax return for the year.

The table shows the standard update periods. If you use calendar update periods, each update covers the period from 1 April 2026 to 30 June 2026, 30 September 2026, 31 December 2026 or 31 March 2027 respectively. The deadlines are the same.

The periods and deadlines are on HMRC's page about sending quarterly updates.

The easing covers quarterly updates only. Your 2026 to 2027 tax return is due by 31 January 2028, and if you miss that deadline it earns a penalty point.

How penalty points work

Late submission penalties under Making Tax Digital for Income Tax are points based:

• You get one penalty point for each missed tax return deadline, and, for tax years after 2026 to 2027, for each missed quarterly update deadline.
• You only get one point per deadline, even if you have more than one business and send more than one update late.
• At 4 points, HMRC charges a £200 penalty, and another £200 each time you miss a further deadline.
• Points for Making Tax Digital for Income Tax are separate from any points you have for VAT.

So the first quarterly deadline that can earn a point is 7 August 2027, for the first update of the 2027 to 2028 tax year.

How points are removed

If you are below 4 points, HMRC removes each point automatically 24 months after the deadline you missed.

If you reach 4 points, your points are no longer removed one by one. To clear them all, you need to:

• send your quarterly updates and submit your tax return on time for 12 months
• send any outstanding quarterly updates and tax returns for the previous 24 months

In exceptional circumstances, such as insolvency, HMRC may cancel a penalty or a point, or remove all your points.

Late payment penalties

Late payment penalties are separate from points. They apply to each payment not made in full by its due date, such as your balancing payment. They do not apply to payments on account.

In your first year of the new penalties, you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan before penalties start. After your first year, that falls to 15 days. You only get the 30-day period once: if you volunteered before you were required to use Making Tax Digital for Income Tax, you keep 15 days.

The rates depend on the tax year the payment is for, not the date you pay.

The daily charge runs until the tax is paid, for up to 2 years. Late payment interest is charged as well, from the first day the payment is late.

If you cannot pay on time, contact HMRC as soon as you can. If HMRC agrees a payment plan and you keep to it, penalties are paused from the date you got in touch.

If you volunteered, or you become exempt

The rules above are for people who are required to use Making Tax Digital for Income Tax. If you volunteered, HMRC's guidance for volunteers applies instead: while you are volunteering you will not get penalties for missing quarterly update deadlines, and your penalty point threshold is 2 points rather than 4. HMRC also says that once you have agreed to the new penalties as a volunteer, you cannot go back to the previous penalties, even if you stop volunteering.

If you were required to use Making Tax Digital for Income Tax and become exempt during the 2026 to 2027 tax year, you go back to the current Self Assessment penalties. If you become exempt in the 2027 to 2028 tax year, you stay on the new penalties, because from April 2027 they apply to everyone who submits a personal Self Assessment tax return. Your threshold then drops from 4 points to 2, and any points you already have are reduced so you are no closer to it.

Appeals

HMRC writes to you for every late submission penalty point, every £200 penalty and every late payment penalty. If you disagree with one, you can appeal, and the letter tells you how.

How to check your penalty points

You can sign in to your HMRC online services account to see the date your points will be removed.

HMRC has also made penalty details available to Making Tax Digital software, through a Retrieve ITSA Penalties endpoint in its Self Assessment Accounts API. HMRC's developer guide says it returns 24 months of penalty information, and the API documentation describes what that includes: your active penalty points, the threshold that applies to you, the date your points will expire if you stay compliant, and any late payment penalties and appeals. Whether you can see this in your software depends on whether your provider supports it.

Key dates

The easing for quarterly updates lasts one tax year. Sending this year's updates on time will help you prepare for 2027 to 2028, when late quarterly updates can earn penalty points for those required to use Making Tax Digital for Income Tax.