A new penalty regime applies where the taxpayer is late in meeting a filing obligation or paying their tax for:

• 2024/25 and 2025/26, where the taxpayer has volunteered to use MTD for income tax for that tax year (taxpayer is a volunteer);
• 2026/27, where the taxpayer is a volunteer or is required to use MTD for income tax for that year (mandated taxpayer); and
• 2027/28 onwards for all taxpayers who use MTD for income tax or are within self assessment (SA), as announced at the Autumn Budget 2025. 

No changes apply to interest on late payments, which continues to be charged as normal.

HMRC has published guidance on the new penalty regime for mandated taxpayers and has updated its existing guidance for volunteers. The key points from the guidance are summarised below.

Please note the focus in this article is on mandated taxpayers and volunteers for tax years up to and including 2026/27. 

The current SA penalty regime continues to apply for tax years where the person is not within scope of the new penalty regime. For example, if a taxpayer uses MTD for income tax from April 2026 and the new penalty regime applies to the 2026/27 submissions onwards, the current penalty regime will continue to apply to their 2025/26 SA return even though the deadline for filing that return is 31 January 2027.  

Late submission penalties

Under the new regime, one penalty point is awarded each time a relevant filing obligation is missed. For volunteers, the end-of-year return is the relevant filing obligation, and for mandated taxpayers it is both the end-of-year return and quarterly updates. 

Taxpayers who meet the points threshold receive a £200 penalty. An additional £200 penalty is charged for each penalty point over the threshold. The threshold is four penalty points for mandated taxpayers and two penalty points for volunteers. 

There are no late submission penalties for quarterly updates under the new regime for 2026/27. However, taxpayers will need to submit their quarterly updates before they can submit their tax return. 

HMRC’s guidance confirms that:

• taxpayers can only receive one penalty point per deadline. This is relevant where a mandated taxpayer is required to make more than one update each quarter, for example, because they have a sole trade and a property business; and
• VAT penalty points are separate to penalty points for MTD for income tax.

Penalty points are removed:

• automatically 24 months after the missed deadline where the person has not reached the threshold; or
• where the taxpayer meets specific conditions or exceptional circumstances apply. 

Late payment penalties

The deadline for paying any tax owed for the tax year remains 31 January after the end of the tax year. Late payment penalties apply as follows:

Late payment penalties do not apply to payments on account. 

Further information

• Making Tax Digital