Is there a penalty for a late MTD quarterly update in 2026?

HMRC has confirmed a 12-month grace period: taxpayers who joined MTD in April 2026 will not receive penalty points for late quarterly updates in their first year. However, penalties still apply to the year-end return, and the obligation to keep digital records applies from day one.

How do MTD penalty points work?

Each late submission earns a penalty point. When points reach the threshold for your filing frequency (4 points for quarterly filers), a £200 penalty is charged, and further late submissions while at the threshold each trigger another £200. Points expire after a period of on-time compliance.

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What happens if you miss an MTD quarterly deadline?

Updated 28 July 2026 · Based on published HMRC guidance · Not tax advice

The first Making Tax Digital quarterly deadline — 7 August 2026 — is the first time hundreds of thousands of landlords and sole traders have ever had to report to HMRC more than once a year. So it's worth being precise about what actually happens if you miss one.

The short answer

For the 2026–27 tax year, HMRC is running a 12-month grace period on penalty points for late quarterly updates. Miss a quarterly deadline in year one and you won't collect a penalty point for it. But three things still matter:

The year-end return keeps full penalties. The final declaration (replacing your old Self Assessment deadline) is not covered by the grace period.
Digital record-keeping applies from day one. The grace period covers late submission, not the requirement to keep compliant records as you go.
The grace period ends. From year two, the points system applies in full — and habits you build now are the ones you'll have then.

How the penalty points system works

MTD uses a "points make penalties" model, similar to driving licence points:

Each late submission earns one penalty point.
For quarterly filers, reaching 4 points triggers a £200 penalty.
While you remain at the threshold, every further late submission triggers another £200.
Points expire after a sustained period of filing on time (24 months of compliance for quarterly filers).

Why this design bites landlords: with four quarterly updates a year (eight if you have property and self-employment income), a disorganised year can reach the penalty threshold quickly. The system punishes patterns of lateness — which is exactly what happens when record-keeping drifts.

Late payment is a separate, harsher track

Penalty points cover late submissions. Paying tax late is penalised separately: interest accrues from the due date, with percentage-based penalties that grow the longer payment is outstanding. If cash flow is the problem, contact HMRC about a Time to Pay arrangement before the deadline — arrangements made in advance generally stop late-payment penalties accruing.

Already late? Do this now

Submit as soon as possible. The record matters even in the grace year — and it stops the problem compounding into the next quarter.
Fix the record-keeping gap that caused it. A late update almost always means records weren't being kept as you went. Fifteen minutes a week in MTD software prevents the next one.
Don't ignore the year-end. If your quarterly data is behind, your year-end declaration will be too — and that one carries real penalties now.

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