What happens if you miss your MTD for Income Tax quarterly update deadline?

Published Thursday 13 August 2026

Table of contents

• MTD for Income Tax penalties: what happens if you miss a deadline
• The 2026/27 soft landing: no penalty points for late quarterly updates
• What the soft landing does not cover
• What to do if you've missed a quarterly update deadline
• How the penalty points system will work from 2027/28
• Late-payment penalties under MTD for Income Tax
• How to stay on top of your MTD deadlines
• Stay on top of Making Tax Digital with Xero
• FAQs on MTD for Income Tax penalties

Key takeaways

• HM Revenue and Customs (HMRC) is introducing a new points-based penalty system for late submissions and late payments of Income Tax. It applies from the tax year you join Making Tax Digital (MTD) for Income Tax, or from April 2027 for everyone else.
• For the 2026/27 tax year, HMRC won't issue penalty points for late quarterly updates — a soft landing for anyone mandated from 6 April 2026. It doesn't cover your year-end tax return or late payment of tax.
• Even without a penalty point, you still need to submit your income and expense data to HMRC before you can finalise your tax return, so it's worth building the habit of staying on top of your digital records now.
• From the 2027/28 tax year, penalty points apply to all late submissions, including quarterly updates: one point per missed deadline, with a £200 penalty once you reach four points.

MTD for Income Tax penalties: what happens if you miss a deadline

If you’re signed up for MTD for Income Tax, and you’ve missed a deadline, here's the reassuring part: for the 2026/27 tax year, you won't get a penalty point for a late quarterly update. Understanding MTD for Income Tax penalties is simpler than the worry suggests, and the first year is gentler than many people expect.

There are three separate things HMRC can penalise you for under Making Tax Digital for Income Tax:

• Late quarterly updates: the four in-year submissions of your income and expenses
• A late income tax return: the year-end return that follows all your quarterly updates
• Late payment: the tax you owe after finalising your income tax return

Quarterly updates, your tax return and late payment each have their own rules – and the 2026/27 soft landing only applies to quarterly updates. That distinction is where most of the confusion sits, so it's worth getting clear on what's covered and what isn't.

Submitting on behalf of a client? Read our guide to MTD for Income Tax penalties for accountants and bookkeepers for more information.

The 2026/27 soft landing: no penalty points for late quarterly updates

For the first year, HMRC won't issue any penalty points for submitting late quarterly updates. This soft landing applies to those sole traders and landlords with qualifying income over £50,000 who are therefore mandated to comply with MTD for Income Tax from 6 April 2026.

In practice, that means if you're late with submitting one, two, or even all four of your 2026/27 quarterly updates, you won't pick up any penalty points. HMRC has described this as breathing room while you adjust to quarterly digital reporting. You can read the detail in HMRC's guidance on penalties for MTD for Income Tax.

One thing hasn't changed, though: the update is still legally required. The soft landing removes the penalty point, not the obligation to send these to HMRC. It's worth staying on top of it regardless - sending to HMRC on time now builds the digital record-keeping habits you'll need once the penalty points system kicks in from 2027/28.

What the soft landing does not cover

The soft landing is narrower than the headlines suggest. It covers quarterly updates only. Two important areas sit outside it.

Your year-end tax return still counts

The soft landing doesn't apply to your income tax return - the year-end return is due by 31 January 2028 for 2026/27. If you submit late, you can still receive a penalty point under the standard rules. You can see what the year-end return involves in HMRC's guidance on submitting your tax return.

Late payment penalties still apply

The soft landing also doesn't cover late payment. If you pay your tax bill late, late-payment penalties and interest apply in full from the first year. Late payment is treated completely separately from late submissions, and there's no first-year reprieve for it.

What to do if you've missed a quarterly update deadline

Missing the 7 August 2026 quarterly update deadline isn't the disaster it can feel like. You won't get a penalty point this year, but you do still need to act. Here's how to get back on track.

1. Bring your digital records up to date

Enter all your income and expenses for the period you missed (6 April to 5 July for the first quarter) into your HMRC-recognised accounting software.

2. Submit your next quarterly update

Because quarterly updates are cumulative, each one covers 6 April to the end of the current period, so once your records are up to date, your next submission automatically captures any period you missed — you won't need to file the same figures twice. If you catch up before the next quarter opens, you can still file the missed period as its own update.

In Xero, a missed deadline shows as overdue, and you can still submit that quarter right up until the next submission window opens. For example, if you missed your first quarterly update, due on 7 August 2026, you can still submit it in Xero up until 5 October 2026.

3. Check your final tax return timeline

You can't submit your tax return until every quarterly update is in, so clearing the backlog matters before 31 January 2028.

4. Set reminders for the rest of the year

The remaining quarterly update deadlines are 7 November 2026, 7 February 2027 and 7 May 2027.

The sooner you catch up, the easier the year-end return will be, because the figures are already in your software. If you're looking for guidance on keeping your records organised, the Making Tax Digital record-keeping guide covers the basics.

How the penalty points system will work from 2027/28

From the 2027/28 tax year, the full points-based system applies and late quarterly updates count. It works a bit like penalty points on a driving licence. Here's the shape of it:

You get one penalty point each time you miss a quarterly update or a tax return deadline

You cannot collect more than one point per deadline, even if you run more than one business or have several income streams — so if you're a sole trader who also lets a property, missing the same quarterly update deadline for both counts as just one point, not two

Once you reach four points, HMRC charges a £200 penalty

After that, HMRC charges a further £200 for every additional missed deadline.

Points don't stay on your record forever. If you stay below the four-point threshold, your points expire after 24 months. Once you've reached four points, you must meet both of the following requirements in order to clear them:

• 12 months of sharing quarterly updates with HMRC on-time
• Every quarterly update and tax return due in the previous 24 months submitted to HMRC.

Paying the £200 penalty on its own doesn't reset your points.

You can read the mechanics in HMRC's guidance on penalties for Making Tax Digital for Income Tax.

Late-payment penalties under MTD for Income Tax

Paying late is treated separately from submitting late, and these penalties apply from the first year of MTD for Income Tax. The good news: If 2026/27 is your first year reporting under MTD for Income Tax, HMRC won't charge a late-payment penalty if you pay within 30 days of the due date, or if you contact them to set up a Time to Pay arrangement before then.

If you fail to pay the full amount within 30 days of the due date then the following late payment penalties will apply:

• 3% of the tax outstanding at day 15 (rising to 4% from 2027/28)
• A further 3% of the tax still outstanding at day 30 (rising to 4% from 2027/28)
• A daily charge at an annual rate of 10% applied from day 31 until the tax is paid, or for up to 2 years.

There is no change to how late payment interest works, which accrues from the due date regardless of whether penalties apply. You can read the detail in HMRC's interest rates for late and early payments. Your payment deadline itself hasn't changed: tax for 2026/27 is due by 31 January 2028.

How to stay on top of your MTD deadlines

The best way to avoid penalties is to keep your records current so each update is a quick job rather than a scramble. A few habits make the year run smoothly:

• Record income and expenses digitally as you go using HMRC-recognised software
• Reconcile your bank transactions regularly so nothing slips through
• Keep the four quarterly update deadlines in your calendar: 7 August, 7 November, 7 February and 7 May
• If something goes wrong, check whether you have a reasonable excuse and appeal within 30 days.

If you have a genuine reason for missing a deadline, such as a bereavement, serious illness or a software failure, you may have a reasonable excuse. You can appeal a penalty within 30 days. For more on what MTD means for the self-employed, the Making Tax Digital for the self-employed guide walks through the requirements.

Stay on top of Making Tax Digital with Xero

Quarterly updates are far less stressful when your digital records are already up to date. Xero is HMRC-recognised and MTD-compatible software that keeps your income and expenses organised throughout the year, so each update is ready when the deadline comes around. Your year-end tax return becomes simpler too, because the figures are already in one place. You can get one month free to see how Xero fits your business.

Note: Dates shown follow standard quarter periods - e.g. the 7 August quarterly update deadline covers 6 April to 5 July. If you use calendar quarter periods, the first quarterly update deadline is 31 July, covering 1 April to 30 June. If you're not sure which you use, check your HMRC-recognised software and apply the dates that match.

FAQs on MTD for Income Tax penalties

Here are answers to some common questions about penalties and the first-year soft landing.

Will I be fined for missing the first MTD quarterly update on 7 August 2026?

No. For the 2026/27 tax year, HMRC won't issue a penalty point for a late quarterly update, so missing the first deadline doesn't trigger a fine. You still need to file the quarterly update as soon as you can.

Does the soft landing apply to my tax return?

No. The soft landing covers quarterly updates only. Your year-end tax return, due 31 January 2028, can still receive a penalty point if it's late. This only applies once you're mandated into MTD for Income Tax — if you're still filing under Self Assessment, none of this applies to you yet.

How many penalty points before I'm fined?

You'll receive a £200 penalty once you reach four penalty points. Each later missed submission adds a further £200.

Do MTD penalty points expire?

Yes. If you stay below the four-point threshold, points expire automatically after 24 months. Once you've reached the threshold, clearing your points requires two things: 12 months of sharing quarterly updates on-time, as well as submitting every quarterly update and tax return due in the previous 24 months.

Can I appeal an MTD penalty?

Yes. You can appeal within 30 days if you have a reasonable excuse, such as bereavement, serious illness or software failure. HMRC can review the appeal, and if it isn't resolved it can go to the First-tier Tribunal.