The Making Tax Digital penalty system is more forgiving than the old fixed-fine model. But only if you understand how it works.
Here is exactly what happens if you miss a quarterly MTD submission.
Points, not pounds (at first)
HMRC has moved to a points-based penalty system for MTD Income Tax. The logic: occasional genuine mistakes should not cost the same as persistent non-compliance.
Miss a quarterly submission → 1 penalty point.
That is it, initially. No fine. Just a point on your account.
When points become money
Hit the threshold → automatic £200 fine.
For quarterly submissions (which MTD Income Tax requires), the threshold is 4 points.
Miss four consecutive quarters without filing? £200 fine. Automatic. No discretion.
What happens after the threshold
Each further failure after hitting the threshold: another £200 per missed submission.
Miss the threshold quarter (4th miss) + the next quarter + the one after = £200 + £200 + £200 = £600.
It compounds. The initial leniency disappears once you have shown a pattern.
How points expire
This is where it gets nuanced. Points do not just age out. They expire when you have filed all required submissions on time for a set period:
- Quarterly filers: points expire after 24 months of full compliance
- But: the clock only starts from the point where you have no outstanding submissions
If you are behind on filings and trying to catch up, the 24-month clock does not start until you are fully current.
The late payment penalty (separate system)
Missing the payment of your tax bill is a different penalty system, not the points model:
- 30 days late: 2% of outstanding tax
- 31-180 days late: additional 2% (so 4% total)
- 181+ days late: 10% per annum until paid
This is separate from submission penalties. You can get both.
What to do if you have already missed one
A single missed submission at 1 point: contact HMRC, file immediately, request a review of the point if there was a genuine reason (illness, bereavement, software failure). HMRC has a reasonable excuse framework.
Do not ignore it. One point is manageable. Four is a £200 fine.
The MTD penalty calculator
landolio.com/tools/mtd-penalty-calculator — estimate your penalty exposure based on missed submissions.
Have you had experience with HMRC penalty appeals? What happened?
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