HMRC has replaced its old default surcharge and fixed penalties with a fairer, points-based system. It has applied to VAT since January 2023, and to Income Tax for anyone using Making Tax Digital from April 2026.
Late filing: points, then a £200 penalty
- Each late return earns 1 penalty point. There’s no fine for the point itself.
- Once you reach the points threshold, you pay a £200 penalty, and another £200 for each further late return.
- For MTD Income Tax, the threshold is 4 points. For 2026/27 you only earn a point for missing the tax return deadline. Quarterly updates count from 2027/28.
- For VAT, the threshold depends on how often you file: 4 points for quarterly and 2 for annual returns. MTD Income Tax points and VAT points are kept separately.
- Points expire after a period of good compliance, so one slip doesn’t follow you for ever.
Late payment: the sooner you pay, the less it costs
| Tax paid | Penalty |
|---|---|
| Within 15 days of the due date | None |
| 16 to 30 days late | 3% of the tax still owed at day 15 |
| 31 or more days late | A further 3% of the tax owed at day 30, plus 10% a year on the balance until paid |
First-year concession: in your first MTD Income Tax year (2026/27), there’s no penalty if you pay within 30 days. Interest still runs from the due date.
Rates rise from 2027/28: for MTD Income Tax, the 15-day and 30-day penalties each go up from 3% to 4%.
If you can’t pay in full, agreeing a Time to Pay arrangement with HMRC early can stop penalties building up. Late payment interest is charged on top, at the Bank of England base rate plus 4%.
What to do
- Know your deadlines, especially your first MTD quarterly updates
- Pay what you can by the due date, and call HMRC early if you can’t
We track every filing and payment date for our clients so penalties don’t happen. Get in touch if you’d like the same peace of mind.
Source: Penalties for Making Tax Digital for Income Tax and late payment penalty rates. Information correct at the time of writing.
Related guides: Making Tax Digital for Income Tax | VAT: Making Tax Digital requirements | Self-employed tax and National Insurance (2026/27)
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