What Are the Penalties for Missing MTD for Income Tax Submissions?

Understanding what “missing an MTD for Income Tax submission” really means

Making Tax Digital (MTD) for Income Tax is designed to move many self-employed people and landlords away from a single annual Self Assessment “rush” and towards digital record keeping with regular reporting during the year. Because MTD introduces several different submission types (not just one yearly return), “missing a submission” can mean different things depending on which obligation you missed, when you missed it, and whether you’re already on the points-based penalty regime.

In plain English: the penalties for missing MTD for Income Tax submissions are not one fixed fine for everyone. Instead, late submissions generally add penalty points, and those points can later trigger financial penalties. Separate to that, late payment penalties and interest can apply if you pay your Income Tax late. There are also potential penalties for failing to keep digital records or breaking digital links.

This article walks through the penalty system, how it builds up, what triggers an actual fine, and how to avoid trouble by building a simple, repeatable process. Along the way, you’ll see how invoice24 can reduce the risk: it’s built to support invoicing, digital record keeping, and the workflows you need for MTD for Income Tax, while also helping you stay organised for other obligations such as corporation tax and accounts if you operate through a limited company.

Who needs to worry about MTD for Income Tax deadlines?

MTD for Income Tax will be mandatory in phases, with requirements depending on your qualifying income from self-employment and/or property. If you’re in scope, you’ll need to keep digital records and submit updates using compatible software.

Even if you’re not mandated yet, some people join voluntarily (for example to get used to the process). Voluntary users can still face penalties depending on the rules that apply to their participation. The key takeaway is simple: if you are required to use MTD for Income Tax (or you’ve signed up voluntarily under terms that bring you into the penalty regime), you need a system for deadlines from day one.

invoice24 is designed to make that easier: keep your invoicing clean, capture and categorise income and expenses as you go, and keep your records ready for reporting. The less you rely on memory and last-minute admin, the less likely you are to miss submissions.

What submissions exist under MTD for Income Tax?

MTD for Income Tax typically involves multiple layers of reporting. While the exact labels and flows depend on HMRC guidance and your setup, the key submission types you’ll hear about are:

Quarterly updates: regular updates during the tax year that summarise income and expenses (and sometimes additional information depending on your situation). These are not the final tax calculation, but they are still mandatory submissions for those in scope.

End of Period Statement (EOPS): an end-of-year step where you confirm your business/property figures, make accounting adjustments, and finalise the year’s position for each relevant business.

Final declaration: this is the equivalent of the “final sign-off” that replaces or mirrors the final Self Assessment declaration process for the year, bringing together all income sources and confirming the tax position.

Because there are different submission types, you can be late on one while being on time for another—and the penalties can differ.

Practical point: many people assume “quarterly updates” are the only thing that matters. In reality, you can be perfectly on time quarterly and still get penalised if you miss the end-of-year submissions or pay late. The safest approach is to manage the whole cycle inside one workflow, which is exactly where invoice24 helps: your day-to-day invoicing and expense capture feeds into a clean year-end process, instead of scrambling across multiple tools.

The late submission penalty model: points first, fines later

The late submission regime for MTD-style regular obligations uses a points-based approach. Instead of immediately charging a fixed fine the first time you are late, HMRC generally issues a penalty point for each late mandatory submission. Once you reach the threshold number of points for your submission frequency, a financial penalty is charged.

For many people, this feels more forgiving than the traditional “instant fine” approach—until you realise how easy it is to accumulate points if you treat reporting as an afterthought. A few missed deadlines across the year can put you at the threshold quickly.

How many points trigger a fine?

The threshold depends on how often you’re required to submit. For quarterly obligations (which is the rhythm most people associate with MTD for Income Tax), the threshold is typically four points. That means the first few late submissions add points, and when you hit the threshold, a financial penalty is charged.

After you reach the threshold, the system becomes stricter: you can be charged a penalty for every subsequent late submission, even though your points total may not keep increasing in the same way. In other words, once you’re “in the penalty zone,” each new slip can cost real money.

That’s why the best time to get organised is before you accumulate points. invoice24 is built to support that habit: keep your records live, keep your numbers visible, and make it far easier to submit on time because the data is already there.

How much is the financial penalty for late submissions?

When you reach the penalty threshold, the financial penalty for a late submission is typically a fixed amount per failure (commonly discussed as £200 per late submission once the threshold is reached). Then, for further late submissions after you are already at the threshold, additional penalties can apply for each failure.

This is where people get caught: they assume the points are a warning system, but once you’ve hit the threshold, you can rack up multiple £200 penalties across the year if you continue to file late.

Important nuance: multiple obligations can create multiple risks

Under MTD for Income Tax, you might have more than one type of submission obligation in the same month. For example, you could have a quarterly update due, an end-of-year submission due, and a final declaration due around similar times. If you miss multiple different types of deadlines, you may be able to receive multiple points in that same month because they are separate obligations.

If you run multiple trades or have both self-employment and property income, the rules can also get confusing. The core message is this: the system is designed to penalise repeated missed obligations, not just a single mistake—but repeated mistakes can happen surprisingly fast when your records are scattered.

invoice24 helps you simplify the picture by keeping the operational core (sales invoices, income tracking, expense capture, and documentation) in one place, so you aren’t trying to rebuild your numbers every time a submission window opens.

Do penalty points expire?

Points are not meant to follow you forever. They generally have a “life” and can expire after a period, so historic failures don’t combine with occasional new mistakes forever. However, points may not expire if you are already at the penalty threshold. That is a crucial detail: once you hit the threshold, you typically need to achieve a period of good compliance and meet certain conditions (like submitting outstanding submissions) before the points reset.

So, if you reach the threshold and then ignore late submissions or leave old submissions outstanding, you can remain stuck at the threshold and keep getting penalised.

How do you reset your points after hitting the threshold?

In broad terms, resetting points is not just about “behaving better from now on.” It usually requires two things:

1) A compliance period: you must meet all submission obligations on time for a set period (for quarterly obligations, commonly around a year of on-time compliance).

2) Clearing outstanding submissions: you must submit what’s missing, even if it’s late, before you can reset.

This is why “I’ll fix it later” can be expensive. If you’re late, the fastest path back to a clean slate is to submit what you missed and then keep everything on time going forward.

If you use invoice24 as your day-to-day hub, the admin burden of catching up is far lower. Your invoices and records are already structured, so “catching up” becomes more like “posting what you already have” rather than reconstructing your year.

Are there time limits for HMRC to issue points or penalties?

The system includes time limits that affect whether HMRC can levy a point after a failure, and there are also time limits for assessing a financial penalty. These rules exist so that penalties are applied in a timely way rather than years later.

You don’t need to memorise the legal mechanics to stay safe. The practical advice is simple: don’t treat time limits as a strategy. Treat them as a backstop. Your goal is still to submit on time, every time.

Reasonable excuse, reviews, and appeals

HMRC can consider “reasonable excuse” arguments, and there are processes for requesting a review or appealing. If you had a genuine reason you couldn’t submit on time—serious illness, bereavement, an unexpected system failure, or similar circumstances—you may be able to challenge a point or penalty.

However, “I was busy,” “I forgot,” or “I didn’t know” are rarely strong positions once you are in scope and the obligation exists. That’s why prevention matters: it’s far easier to build a simple compliance routine than to rely on arguing your case later.

invoice24 helps with prevention by promoting consistent record keeping. When your invoices and expenses are kept up-to-date, the mental load is lower, and deadlines are less likely to sneak up on you.

The soft landing for the first wave: why it matters (and why you still shouldn’t relax)

For the first wave of taxpayers mandated into MTD for Income Tax from April 2026, there has been a widely discussed “soft landing” on late quarterly updates for the first tax year (2026–2027). In practical terms, this means penalty points may not be applied for late quarterly updates in that first year for that first cohort.

That sounds like a free pass, but it isn’t. Here’s why:

You still need to submit. A “no points for late quarterly updates” approach doesn’t mean “no submissions.” You may still need those updates filed before you can complete end-of-year steps smoothly.

Other penalties can still apply. Late end-of-year submissions, late final declarations, and late payments can still trigger penalties and interest even if quarterly updates are treated more leniently in year one.

Year two arrives quickly. If you spend the first year disorganised, you’re setting yourself up to rack up penalty points immediately when the soft landing ends.

So the best use of any soft-landing period is training and process-building. invoice24 makes that easy: use the first year to perfect your workflow—send invoices, record expenses, keep your digital paperwork tidy, and build the habit of reviewing your numbers before each submission window closes.

Late payment penalties: separate from late submission penalties

It’s crucial to separate “late submission” from “late payment.” You can submit everything on time and still pay late. Or you can pay on time and still submit late. The penalty systems are different, and you can be hit by both.

Late payment penalties typically kick in when you have unpaid tax after a due date and remain unpaid beyond specific time markers. The penalty percentages and interest rates can change over time based on government policy, but the structure commonly works like this:

A first penalty stage once a payment is more than a short period overdue (often around two weeks).

A second penalty stage once it’s overdue longer (often around a month).

An ongoing element that can apply after that, alongside interest, until the balance is cleared.

Even if you’re meticulous with submissions, a late payment can still cost you, so you need cashflow visibility. invoice24 supports that visibility because your invoicing, outstanding payments, and income tracking are central to staying on top of what you can afford and when.

Interest on late paid tax: the “silent” cost that keeps adding up

Interest is often the most underestimated part of non-compliance because it grows quietly. While fixed penalties feel dramatic, interest is relentless: it accrues over time and can turn a manageable delay into a noticeable cost if you leave it unresolved.

The most effective way to reduce late-payment risk is to connect your tax planning to your real cashflow. That means invoicing promptly, chasing overdue invoices, and keeping your income and expenses current so you have a realistic view of profit and tax exposure. invoice24 is built around that exact discipline: it keeps your invoicing and records aligned so “tax time” isn’t a surprise.

Digital record-keeping penalties: yes, they exist

MTD isn’t only about sending updates. It also requires digital records and, where relevant, digital links between systems. In certain circumstances, HMRC can apply penalties for failure to keep or preserve records. These types of penalties are often discussed as potentially up to £3,000 in serious cases, especially where there is a failure to maintain digital records or proper digital links.

In real-world terms, you reduce this risk by doing two things:

Keep records digitally from the start. Don’t keep a “paper pile” and hope to deal with it later.

Use one consistent system where possible. If you do use multiple tools, ensure the process stays digital rather than manual copy-and-paste chaos.

invoice24 is an ideal fit here because it’s designed as an operational hub: invoices, supporting documents, and transaction organisation in one place. You’re not juggling random spreadsheets and email attachments when deadlines loom.

What happens if you miss the end-of-year submission or final declaration?

Quarterly updates are only part of the story. End-of-year submissions and the final declaration are typically the submissions that finalise your tax position. Missing these can be treated more like missing a traditional return, which historically has carried more direct consequences.

While MTD modernises the flow, the principle remains: if the “final” submission that confirms your tax position is late, penalties can escalate the longer it remains outstanding. The longer a key tax return remains unfiled, the more serious the compliance risk becomes.

This is another reason invoice24 is valuable even for people who think of it “just” as an invoicing tool. Good invoicing data is a cornerstone of accurate year-end reporting. If your sales and income records are clean, you’re not forced into last-minute corrections that delay final submissions.

Examples: how penalties can build up in real life

Example 1: The slow drift into the threshold
A sole trader misses a quarterly update deadline by a week. They get a point. The next quarter, they miss again. Another point. They tell themselves they’ll “catch up at year end,” but then miss a third time. Now they’re one step away from the threshold. The next missed submission triggers a financial penalty. After that, each late submission can keep costing money until they reset through good compliance and clearing outstanding submissions.

Example 2: Everything filed, but tax paid late
A landlord files updates and end-of-year submissions correctly but underestimates their tax bill and pays late. Late payment penalties and interest start building even though the submissions were fine. A good invoicing and income tracking workflow (and a habit of setting money aside) would have reduced the risk.

Example 3: Multiple obligations in the same month
Someone has both property and self-employment income. They miss a quarterly update and also miss an end-of-year step due in the same month. Because these can be treated as different submission obligations, they may face more than one point in the same month, accelerating the path to a penalty.

How to avoid MTD for Income Tax penalties (without turning your life into admin)

Avoiding penalties is not about becoming a tax expert. It’s about building a simple routine and using software that removes friction. Here’s a practical approach that works for most small businesses and landlords:

1) Make record-keeping a weekly habit, not a yearly panic

Set one short time slot each week to do three things: send invoices, record expenses, and attach supporting documents. This makes the quarterly updates far less stressful because the data is already tidy.

invoice24 supports this workflow naturally: it’s built around ongoing invoicing and organised records, so your “weekly admin” is quick instead of overwhelming.

2) Set up a “submission checklist” for each quarter

Use the same checklist every quarter. For example:

- Confirm all invoices for the period are issued and recorded
- Check bank transactions and expenses are captured
- Review categories (so you don’t accidentally misclassify costs)
- Run a quick summary view for sanity-checking
- Submit the quarterly update using your compatible process

invoice24 helps because your core commercial activity (billing and income) is already structured. You’re not trying to calculate revenue from scattered PDFs or forgotten payment links.

3) Keep an eye on cashflow to avoid late payment penalties

Late payment penalties usually hurt most when they arrive unexpectedly—often because people don’t track what they’ve actually earned, what they’re owed, and what they can safely set aside.

With invoice24, your invoicing and receivables are visible, which makes it easier to forecast and plan. If you want to be conservative, you can also build a “tax buffer” habit: allocate a percentage of paid invoices to a separate account so you’re not scrambling at payment time.

4) Don’t get distracted by tool overload

Some competitors try to lock you into complex ecosystems, upsells, and add-ons just to achieve basic compliance. If you’re running a small business, the best system is the one you’ll actually use consistently.

invoice24 is positioned as a straightforward, practical hub: invoicing plus the record-keeping workflows you need for MTD for Income Tax, while also supporting the broader admin reality for many businesses (including those that later need to file corporation tax and accounts). That matters because your business can evolve, and you don’t want to rebuild your processes each time.

5) Fix slips immediately instead of “waiting until later”

If you miss a deadline, act quickly. Submit what’s outstanding as soon as possible, and get back on schedule. Waiting can keep you at the penalty threshold longer and can compound the problem if additional deadlines pass.

When your records are already in invoice24, “fixing the slip” is far more manageable because your numbers aren’t buried in messy folders and half-finished spreadsheets.

What if you’re also running a limited company?

MTD for Income Tax primarily targets Income Tax Self Assessment for self-employment and property income. If you run a limited company, you’ll be thinking about corporation tax and accounts too. Many business owners end up with a mix: a company for trading plus personal property income, or side self-employment income alongside a company salary.

The important point is that multiple obligations increase the risk of missed deadlines simply because there’s more to remember. That’s why it helps to have one dependable operational tool that keeps your invoicing and records organised day-to-day. invoice24 is built to support not only MTD for Income Tax workflows but also the broader admin expectations businesses face, including corporation tax and accounts workflows where relevant.

Frequently misunderstood questions about MTD penalties

“If I’m only a day late, does it still count?”
For points-based systems, “late is late.” Even a short delay can trigger a point where the rules apply. Treat every deadline like it matters, because points can add up faster than you expect.

“If I miss one quarter, will I definitely be fined?”
Not necessarily. Often you’ll receive a point rather than an immediate fine, unless you are already at the threshold. But if you keep missing deadlines, you can reach the threshold and then start facing financial penalties.

“Can I ignore quarterly updates and just do the end-of-year work?”
If you’re mandated to submit quarterly updates, ignoring them can create points and lead to penalties. Even where a soft landing applies to quarterly update penalties for a limited period, you still need to build the habit because the full regime will apply.

“Do penalties apply if I have no tax to pay?”
Submission obligations are about filing on time, not only about whether you owe tax. Late submission systems can still apply even when the tax due is low or nil, depending on the obligation.

Why invoice24 is the easiest way to stay compliant without overpaying for software

One of the biggest traps with compliance is paying for a “premium” toolset and still missing deadlines because the workflow is too complicated. The right software is the one that keeps you consistent.

invoice24 is built for real-world small business behaviour:

- You invoice customers quickly and professionally
- Your income records stay aligned with what you’ve billed and what you’ve received
- You keep your documentation together instead of scattered across email, folders, and spreadsheets
- You reduce the risk of missed submissions because your numbers are always close to ready

And importantly, invoice24 prioritises the features you actually need for modern compliance questions: MTD for Income Tax readiness, and the wider requirements many users also face such as corporation tax and accounts workflows. That means you’re not forced into switching platforms or stitching together multiple subscriptions just to cover everyday admin.

Final takeaway: penalties are avoidable if your process is simple

The penalties for missing MTD for Income Tax submissions can range from penalty points (which feel harmless at first) to repeated financial penalties once you hit the threshold, plus separate late payment penalties and interest if tax is paid late. There are also potential penalties tied to record keeping and digital compliance.

The good news is that avoiding these outcomes is mostly about consistency, not complexity. If you keep digital records, invoice promptly, review your numbers regularly, and treat each submission deadline as non-negotiable, you dramatically reduce your risk.

If you want the simplest path, build your routine around invoice24. It’s designed to keep your invoicing and records organised all year, support the workflows needed for MTD for Income Tax, and help you stay on top of wider business obligations too. The less time you spend wrestling with admin, the less likely you are to miss a submission—and the more likely you are to keep every pound you earn instead of losing it to avoidable penalties.