Missed an MTD for Income Tax deadline? What landlords and sole traders need to know

Making Tax Digital (MTD) for Income Tax brings more regular reporting deadlines for landlords and sole traders. If a deadline is missed, HMRC’s new penalty rules may apply.

A single late quarterly update won’t automatically mean a fine, but repeated delays can lead to penalties.

What happens if a quarterly update is late?

For the 2026/27 tax year, HMRC won’t issue penalty points for late quarterly updates. This gives those using MTD for the first time some time to get used to the new reporting process.

However, outstanding quarterly updates will still need to be submitted before the annual tax return can be completed.

From 2027/28, missing a quarterly update deadline will normally result in a penalty point.

How does the penalty points system work?

For MTD for Income Tax, the penalty threshold is four points.

Once four points are reached, HMRC can issue a £200 penalty. Any further missed submission deadlines while the taxpayer remains at the threshold can result in another £200 penalty.

If the threshold hasn’t been reached, individual points will normally expire after 24 months.

Once the threshold has been reached, all relevant submissions must be made on time for 12 months and any outstanding submissions from the previous 24 months must be brought up to date before the points can be cleared.

What about late tax payments?

Late payment penalties are separate from late submission penalties.

For tax due for 2026/27:

• no penalty normally applies if payment is no more than 15 days late;
• a 3% penalty can apply to tax still outstanding at day 15; and
• further penalties can apply if tax remains unpaid after 30 days.

Late payment interest can also run from the first day the payment is overdue.

In the first year that the new late payment rules apply, HMRC allows 30 days from the payment deadline to pay in full or agree a payment plan before late payment penalties start to apply.

Missed a deadline?

A missed deadline doesn’t necessarily mean an immediate financial penalty, but it’s important to act quickly.

Anyone who has fallen behind should check what is outstanding, bring digital records up to date and submit the required information as soon as possible.

Need help?

The MTD for Income Tax penalty system can be confusing, particularly because the rules for late submissions and late payments are different.

Larking Gowen can provide guidance on MTD for Income Tax and the steps to take if a submission or payment deadline has been missed.

Martin Bugg | Director in our Business team | Based in Norwich, Norfolk