Making Tax Digital (MTD) introduces a much stricter penalty system that is designed to encourage timely and accurate reporting.
If you don’t meet the new requirements, the fines can stack up quickly.
Our job is to help you stay ahead of deadlines and avoid unnecessary penalties.
So, what penalties could you face for non-compliance with MTD?
MTD penalties at a glance
The new penalty regime under MTD is designed to be more consistent and to focus on keeping taxpayers compliant through regular reporting. Here’s how it works:
Late submission penalties
Every time you miss a deadline for a quarterly update or final declaration, you earn a penalty point.
- One point for each late submission
- Four points = £200 penalty for quarterly updates
- Two points = £200 penalty for missing your final declaration
- After that, every additional late submission = automatic £200 fine
Your points don’t stick around forever, they expire after two years if you stay compliant.
However, once you hit the penalty threshold, you will need to file everything on time for 12-24 months to reset your slate.
Late payment MTD penalties
If you don’t pay your tax bill on time, penalties will start building up:
- Three per cent penalty on the unpaid tax at 15 days overdue
- Another 3 three per cent if you still haven’t paid after 30 days
- From day 31 onwards, daily penalties start to accrue at 10 per cent per annum
And don’t forget, HMRC also charges interest on late payments, at a rate of four per cent above the Bank of England base rate, so it really adds up.
An example of how easily fines can escalate
Let’s say you miss four quarterly MTD submissions.
That triggers the four point threshold, meaning you’re hit with a £200 fine. If you then miss the next submission, that’s another £200 fine straight away.
If you don’t pay what you owe, by day 31 you could face:
- A six per cent late payment penalty
- Additional daily penalties (10 per cent p.a.)
- Accrued interest
This is why staying on top of MTD obligations is a must, and why we recommend getting everything in place well ahead of time.
How Thorne Widgery helps you stay compliant
Our MTD support service is designed to help you:
- Set up MTD-compatible software that simplifies record-keeping and submissions
- Create clear, manageable processes so deadlines aren’t missed
- Provide deadline monitoring and reminders — so you’re never caught off guard
- Assist with HMRC time-to-pay arrangements if you need breathing space on payments
Act now to stay penalty-free
The MTD rules might feel a while away, but acting now means you can approach April 2026 with confidence, with no fear of unexpected fines. Let’s plan your MTD journey together.
Got a query or want to get started on MTD planning? Drop us a line at mtd@thornewidgery.co.uk, our friendly team is here to help.