Each missed deadline earns one penalty point. At four points you pay a £200 penalty, and £200 again for each later miss until your points are cleared. Paying tax late is separate: from the 2027–28 tax year, it's 4% of what you owe if it's still unpaid after 15 days, another 4% after 30 days, then 10% a year on top, plus interest.
Penalty points for late updates and returns
Making Tax Digital uses a points system instead of an instant fine:
- You get one point each time you miss a deadline for a quarterly update or your tax return.
- If several of your income sources miss the same deadline, it's still one point, not one for each.
- When you reach four points, you get a £200 penalty. Each further missed deadline while you're on four points is another £200.
- While you're under four points, each point expires after 24 months.
- Once you've reached four points, they're only cleared after a period of sending everything on time with nothing overdue.
In practice, one late update now and then won't cost you money. A habit of missing deadlines will.
The first year
For the 2026–27 tax year, HMRC isn't giving points for late quarterly updates. The tax return still counts.
HMRC's guidance says points apply to quarterly updates for tax years after 2026–27. So if you start in April 2027, plan for your updates to count from your first quarter.
Paying late
Late payment penalties apply to tax you owe, not to quarterly updates, which never come with a bill. From the 2027–28 tax year:
| How late | Penalty |
|---|---|
| Up to 15 days | No penalty |
| 16 to 30 days | 4% of the tax still unpaid on day 15 |
| 31 days or more | 4% of what was unpaid on day 15, plus 4% of what's unpaid on day 30, plus 10% a year on what's still unpaid, charged daily from day 31 |
For 2026–27, the two percentages are 3% instead of 4%. In your first Making Tax Digital year, HMRC's guidance says there's no penalty for paying 16 to 30 days late. Interest is charged on anything unpaid from the day after it was due, whatever happens.
If you can't pay in full, contact HMRC as soon as you can. Agreeing a payment plan early can stop the penalty growing.
How to avoid penalties
- Send each update early. You can send it as soon as the quarter ends. There's no advantage in waiting for the 7th.
- Keep your records as you go. If your transactions are sorted each week, an update takes minutes.
- Set money aside. Knowing your tax bill in advance is the best protection against paying late.
- Know your dates. Updates are due on 7 August, 7 November, 7 February and 7 May, and your tax return and payment by 31 January. See quarterly updates and deadlines.
If you had a good reason
If something outside your control stopped you meeting a deadline, such as a serious illness or a bereavement, you can ask HMRC to remove a point or penalty. HMRC calls this a reasonable excuse. You need to send the update or return as soon as you can once the problem is over.
Sources
This guide explains HMRC's rules in general and isn't tax advice. For your own situation, check GOV.UK or speak to an accountant.