What changed from Self Assessment?
Under the old Self Assessment system, missing the 31 January deadline cost you a flat £100 fine immediately, with additional penalties the longer you delayed. It was a blunt instrument — equally punishing whether you were a day late or six months late at the start.
The MTD penalty system works differently. It's designed to be lenient with occasional slips but strict with persistent non-compliance. A single missed quarterly update won't cost you anything financially — but let it happen repeatedly and the fines start to stack up quickly.
How penalty points work
Every time you miss an MTD submission deadline, HMRC adds one penalty point to your record. Points accumulate over time. Once you reach the threshold for your submission frequency, HMRC issues a £200 financial penalty.
For sole traders filing quarterly updates, the threshold is four points. After that, every additional late submission triggers another £200 fine.
1 point — no fine yet
4 points reached — £200 fine issued, plus £200 for every subsequent miss
How long do points stay on your record?
If you haven't reached the four-point threshold, penalty points expire automatically after 24 months from the date they were issued. So a single slip in year one doesn't follow you indefinitely.
Once you've reached the threshold and received a financial penalty, it's different. Points will only be reset to zero after you:
- File all outstanding submissions that are overdue
- Then submit on time for a full compliance period — for quarterly filers, this is 24 consecutive months of on-time submissions
In other words, once you've accumulated four points and triggered fines, it takes two full years of clean compliance to wipe the slate. The system is deliberately designed to discourage persistent non-compliance.
The 24-month reset clock only starts once all outstanding submissions are filed. If you have overdue updates, file them first — even if they're late — before the compliance period begins.
What triggers a penalty point?
A penalty point is issued for any of the following submissions that are filed after their deadline:
- A quarterly update (any of the four quarters)
- An End of Period Statement
- A Final Declaration
Each missed deadline is one point, regardless of how late you are. Being a day late counts the same as being three months late, from a points perspective.
A reminder of your quarterly deadlines
| Submission | Period / Due by | Points if missed |
|---|---|---|
| Q1 update | 6 Apr – 5 Jul | 5 August 2026 | +1 point |
| Q2 update | 6 Jul – 5 Oct | 5 November 2026 | +1 point |
| Q3 update | 6 Oct – 5 Jan | 5 February 2027 | +1 point |
| Q4 update | 6 Jan – 5 Apr | 5 May 2027 | +1 point |
| Final Declaration | 31 January 2027 | +1 point |
Reasonable excuse — when HMRC may waive a point
HMRC will consider removing a penalty point if you have a reasonable excuse for missing a deadline. Accepted examples typically include:
- A serious or life-threatening illness affecting you or someone you care for
- A bereavement close to the deadline
- A technical failure in HMRC's own systems
- A genuine postal delay (for paper-based submissions, though MTD is digital)
What HMRC does not accept as a reasonable excuse:
- Forgetting the deadline
- Being too busy with work
- Difficulty using the software
- A software provider's failure that you could have reported and resolved before the deadline
To appeal a penalty point, use HMRC's online appeals service within 30 days of receiving the penalty notice.
What about late payment penalties?
The points system covers late filing only. Late payment of your tax bill is handled under a separate regime — HMRC charges interest on overdue tax from the day after the payment deadline, plus additional percentage-based surcharges for longer delays.
Quarterly updates don't trigger any payment — no tax is due at each quarter. Your tax bill is calculated after your Final Declaration and is due by 31 January.
The simplest way to avoid penalty points is to never miss a deadline. Set calendar reminders for each of the five submission dates in the tax year, or use software that notifies you automatically — and ideally files for you.
Never accumulate a penalty point
Bart reminds you before each quarterly deadline and can file your update automatically. No missed deadlines, no points, no fines.
Try Bart freeFrequently asked questions
How many penalty points before I get a fine?
For quarterly filers under MTD, the threshold is four penalty points. Once you reach four points, HMRC issues a £200 financial penalty. Every subsequent missed submission while you remain at or above the threshold also triggers a £200 fine.
How long do MTD penalty points stay on my record?
Penalty points expire after 24 months if you haven't reached the threshold. If you have reached the threshold and received a financial penalty, points are only reset to zero once you've filed all outstanding submissions and then submitted on time for a full compliance period (two years for quarterly filers).
What if I have a reasonable excuse for missing a deadline?
HMRC may waive a penalty point if you have a reasonable excuse — for example, a serious illness, bereavement, or a technical failure with HMRC's own systems. You'll need to appeal the point and provide evidence. Ordinary business pressure or forgetting the deadline are not accepted as reasonable excuses.
Does a late quarterly update also trigger a late payment penalty?
No. Quarterly updates are a reporting obligation — no tax is due at each quarter. Late payment penalties apply separately to your Final Declaration and any tax owed by 31 January. The points system covers late filing only.