The 7 August deadline is approaching — the date by which every sole trader and landlord enrolled in Making Tax Digital for Income Tax must submit their first quarterly update for the period 6 April to 5 July 2026 (or 1 April to 30 June if you use calendar quarters). Miss it, and you might assume HMRC will immediately reach for the penalty calculator. The reality is more nuanced — and understanding exactly what happens, both now and in future tax years, could save you real money.
First, the Good News About 2026–27
For the first year of MTD ITSA — the 2026 to 2027 tax year — HMRC has confirmed there are no penalty points for missing a quarterly update deadline. This is a grace period, and it applies to all four quarterly updates for this tax year.
So if you miss the 7 August 2026 deadline, you will not receive a penalty point and you will not face a financial penalty for that missed quarterly update. HMRC has built this flexibility into the first year to allow taxpayers time to adjust to the new system.
That said, missing the update is not without consequence. You still need to send the outstanding quarterly update before you can submit your end-of-year tax return. It does not disappear — it just does not immediately cost you money. Think of it as a deadline without an immediate fine, but with an administrative burden that does not go away.
What the Points System Actually Looks Like From 2027–28
From the 2027 to 2028 tax year onwards, the grace period ends and the points-based penalty system kicks in fully for quarterly updates. This is where things get serious.
Every time you miss a quarterly update deadline, HMRC issues one penalty point. The points accumulate. Once you reach four points, a £200 financial penalty is automatically triggered. Miss another deadline after that? Another £200. And so on.
The threshold of four points is significant. With four quarterly updates per year, you could in theory hit the threshold within a single tax year — though most people are likely to miss one or two before catching up. The system is designed to penalise persistent non-filers rather than punish a one-off slip.
How Points Expire
If you accumulate points but stay below the four-point threshold, those points do not stick around indefinitely. HMRC removes them automatically 24 months after the missed deadline that caused each point.
If you reach or exceed the four-point threshold, the expiry rules change. Your points will not be removed automatically. Instead, you need to:
- Submit every update and return on time for 12 consecutive months, and
- Send all outstanding updates and returns from the previous 24 months
Only once both conditions are met will HMRC clear your points tally. It is a meaningful hurdle — designed to ensure the system is not gamed by filing on time for a month or two then slipping back into missed deadlines.
What About Late Payment Penalties?
The points system above relates to late submission — missing the deadline to send the quarterly update itself. Late payment of any tax owed is a separate matter, with its own penalty structure.
For payments that are up to 15 days late, there is currently no penalty. Between 16 and 30 days late, a penalty of 3% of the tax owed applies in 2026–27, rising to 4% from 2027–28. If you go beyond 30 days, penalties escalate further, and HMRC charges interest at 10% annually, calculated daily, for up to two years.
For the first year (2026–27), there is a 30-day grace period before late payment penalties apply, rather than the 15-day window that applies thereafter.
Why This Still Matters Even With the Grace Period
The lack of immediate financial penalties in 2026–27 is not an invitation to ignore the system. The quarterly update requirement does not go away — it must be filed before your tax return can be submitted. If you miss Q1 in August and Q2 in November and Q3 in February, you will face a significant backlog of outstanding submissions before you can even touch your annual return.
More importantly, building bad habits now will hurt from April 2027 onwards. The taxpayers who find themselves with four penalty points by the summer of 2028 will almost certainly be the ones who treated the first year as optional practice. Getting the process right in 2026–27 — using HMRC-compatible MTD software and establishing a routine — is far less painful than unpicking compliance failures under a live penalty regime.
For a full breakdown of what MTD ITSA requires from you — including income thresholds, who qualifies, and how quarterly updates work — the complete guide to MTD ITSA on Finance Journal is a useful starting point.
FAQ
Q: Will I get a fine if I miss the 7 August 2026 quarterly update deadline?
No — for the 2026 to 2027 tax year, HMRC has confirmed there are no penalty points or financial penalties for missing quarterly update deadlines. The grace period covers all four quarterly updates in the first year. You must still submit the update eventually, as it is required before you can file your year-end tax return.
Q: When do the penalty points start applying to quarterly updates?
From the 2027 to 2028 tax year onwards. Each missed quarterly update deadline from that point earns you one penalty point. Reach four points and a £200 penalty is issued. Each subsequent missed deadline costs another £200 on top.
Q: Can I get my penalty points removed once I have hit the four-point threshold?
Yes, but it takes sustained compliance. You need to submit all updates and returns on time for 12 consecutive months, and also clear any outstanding submissions from the previous 24 months. Both conditions must be met before HMRC will reset your points total.
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