HMRC won’t issue fines if quarterly tax updates are missed in 2026/27 (Image: Getty)
HM Revenue and Customs (HMRC) is waiving £200 fines for some taxpayers this year as it rolls out a major tax change. From April 6, will require those earning more than £50,000 from self-employment and property to file a tax return every three months, instead of just once a year, with lower income bands to be added in subsequent years. The changes come as part of a new ‘Making Tax Digital’ system that will require people to keep digital records throughout the year and submit quarterly updates to the tax office, along with an annual ‘MTD tax return’.
The new system is intended to help save people time on filing their tax return by spreading the workload more evening throughout the year, so rather than submitting one tax return in January, people will instead be required to send quarterly updates to HMRC. It means there will be four deadlines in a tax year certain taxpayers will be required to meet from April, and those who file late will be hit with £200 fines – but these will be waived in the first year.
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HMRC has confirmed that fines won’t be issued if quarterly updates are missed in 2026/27, but taxpayers will still be subject to a penalty for late tax returns at the end of the tax year.
HMRC said: “If you do not send your quarterly update by the relevant deadline, you may get a late submission penalty. These penalties do not apply when you’re volunteering or testing Making Tax Digital for Income Tax. They will apply when you’re required to use it.
“If you need to use Making Tax Digital for Income Tax from 6 April 2026, we will not apply penalty points for late quarterly updates for the first 12 months. Penalty points will still apply for late tax returns. You will still need to send your quarterly updates before you are able to submit your tax return.”
Under the new regime, when a taxpayer misses a submission deadline they will incur a penalty point and be liable to pay a fixed penalty of £200 when they have reached a points threshold based on their submission frequency.
The Institute of Chartered Accountants in England and Wales explains: “The new late submission penalties are points based. If the submission frequency is annual, once the taxpayer reaches two points, they will be charged a £200 penalty. A further £200 penalty will be charged if another annual tax return is submitted late.
“Once a taxpayer is mandated to use MTD income tax and is required to make quarterly submissions, a £200 penalty is applied once they have received four points.”
Taxpayers will also incur costs based on late payments of tax, with the new late payment penalty set to consist of two separate charges – one payable 30 days after the payment due date based on a set percentage of the balance outstanding and one payable from day 31 that will accrue daily, based on the sum outstanding.
Experts at the Association of Taxation Technicians (ATT) said: “Under the new late payment penalty regime, penalties are issued based on the number of days which the payment is overdue. 15 days or less = no penalty charge. 16 to 30 days (inclusive) = 3% of the tax outstanding on the 15th day.
“31 days or more = 3% of the tax outstanding on the 15th day. An additional 3% of the tax outstanding on the 30th day. An additional 10% p.a. charge will apply until the payment is made. In addition to penalties, interest will be charged on any late payments, as it is currently.”
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While no penalty points will be charged for late submission of mandatory quarterly updates during the 2026/27 tax year, tax experts warn that deadlines will still be in place, and those who delay preparing risk confusion, missed submissions and mounting problems later on.
February and March are the key months to get ready for Making Tax Digital as, even without penalties in 2026/27, falling behind early can make the system hard to keep up with.
Taxpayers in MTD will need digital records in place for the whole year, and to have submitted some information in quarterly updates in order to file their tax return for the year.
Emma Rawson, Director of Public Policy at the ATT, added: “It’s helpful that penalties won’t apply in the first year, but people shouldn’t see that as a reason to wait. Making Tax Digital brings multiple new deadlines and new rules. February and March are when people need to act — April may be too late.”
