MTD Penalties and Late Filing: How the Points System Works

Introduction

Making Tax Digital introduces new reporting requirements. Alongside those requirements, HMRC is rolling out a points-based penalty system for late submissions.

This guide explains the basics of how MTD penalties work and how to avoid them.

---

How the points system works

Under the points-based system:

• each late submission earns a penalty point
• points add up across missed deadlines
• once you reach the threshold for your filing frequency, a financial penalty is charged
• points expire after a period of compliance

The exact thresholds and expiry periods depend on how often you are required to submit updates.

---

Late payment penalties are separate

The points system applies to late submissions. Paying tax late can still trigger late payment penalties and interest. Submitting on time does not remove the need to pay on time.

---

Common reasons people get points

• missing a quarterly update deadline
• forgetting the End of Period Statement
• submitting the final declaration late
• relying on last-minute data without reviewing records

---

How to avoid MTD penalties

• keep digital records up to date
• set reminders for quarterly deadlines
• use software that prompts you before each submission
• submit early if possible

---

What to do if you receive a penalty

If you think a penalty is incorrect, you can appeal to HMRC. Keep evidence of when you submitted and any issues that prevented timely filing.

---

How QTax helps

QTax tracks deadlines and guides you through each submission step, reducing the risk of missed updates or late declarations.

---

FAQs

Are penalties automatic?

HMRC applies penalties based on submission records. If you submit late, a point can be added automatically.

Is there any warning before a penalty?

You can track your points balance in your HMRC account. Once you reach the threshold, HMRC issues a penalty notice.

Do points reset each tax year?

Points expire after a period of compliance rather than at the end of the tax year. Always check the latest HMRC rules for your filing frequency.

---

Conclusion

The points system is designed to encourage on-time submissions. With a simple routine and the right software, you can avoid penalties and stay compliant with MTD requirements.