MTD Penalty Calculator
Estimate what HMRC will charge if you miss MTD deadlines or pay your tax late.
Your scenario
If yes, you get two soft landings: no penalty points for the first four quarterly updates (Phase 1 cohort only) AND a 30-day grace before any late-payment penalty.
Soft landing does NOT cover the Final Declaration. Even Phase 1 cohort filers get a point if late.
We assume the unpaid amount stays constant throughout (no partial payments).
Tell us your scenario on the left to see your estimated HMRC charge.
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Avoid penalties by staying MTD-ready in Katalyst
Katalyst helps UK sole traders and landlords keep MTD-ready records: log income and expenses in seconds, organise receipts, and stay prepared for when you submit. Free to start, no credit card required.
What is the MTD penalty regime?
Making Tax Digital (MTD) for Income Tax introduces a new penalty regime alongside the quarterly-update and Final Declaration requirements. HMRC uses two distinct systems:
- Late submission: a points-based system, similar to driving licence points. Each missed quarterly update or late Final Declaration earns 1 point. Hit the threshold and a fixed £200 penalty triggers; each subsequent late submission is another £200.
- Late payment: a percentage-based system on unpaid tax. Penalties trigger at day 15 and day 30 of being late, with a daily-accruing charge from day 31.
Both are separate from late payment interest (currently 7.75% per annum) which accrues from day 1.
How the points system works
The threshold for a quarterly filer is 4 points, per gov.uk:
“For each quarterly update (for tax years after 2026 to 2027) or tax return deadline you miss, you'll get a penalty point. The penalty point threshold is 4 points.”
Below the threshold, points are automatically removed 24 months after each late deadline. Once you hit threshold, you need to file on time for 12 months PLUS clear any outstanding submissions for the previous 24 months to reset.
Late payment vs late submission: they're different
- Late submission triggers points (and £200 at the 4-point threshold).
- Late payment triggers a percentage of unpaid tax: 3% at day 15, additional 3% at day 30, plus 10% per annum daily from day 31. (Rates step up to 4%/4%/10% for the 2027/28 tax year onwards per Autumn Budget 2025.)
- Interest runs in parallel from day 1 at 7.75% per annum.
The two year-1 soft landings: don't conflate them
Autumn Budget 2025 introduced two separate soft landings:
- Late submission soft landing: Phase 1 cohort only. For 2026/27, no penalty points apply to the first four quarterly updates. Does NOT cover the Final Declaration. Does NOT extend to Phase 2 or Phase 3 cohorts.
- Late payment soft landing: any taxpayer's first MTD year. The grace period before any late-payment penalty extends from 15 days to 30 days. The day-15 penalty is waived entirely (not deferred). Phase 2 cohort gets this in 2027/28; Phase 3 in 2028/29.
Source: ICAEW Autumn Budget 2025 analysis.
Why this tool exists
To give UK sole traders and landlords a realistic picture of what penalty exposure looks like in real money terms, so they can plan to avoid it.
Important: Katalyst is not on HMRC's MTD-recognised software list. This calculator is a planning aid only. We do not file anything on your behalf or talk to HMRC for you. When you're ready to submit, you'll need MTD-recognised software from gov.uk.
Frequently asked questions
What is the MTD penalty?▼
There are three separate charges HMRC can apply:
- Penalty points for each missed quarterly update or late Final Declaration. 4 points = £200; each subsequent late submission = another £200.
- Late payment penalty as a percentage of unpaid tax: 3% at day 15, additional 3% at day 30, plus 10% per annum daily from day 31 (rates step up to 4%/4%/10% from 2027/28).
- Late payment interest at 7.75% per annum (Bank of England base rate + 4%) accruing from day 1.
Sources: gov.uk MTD penalties and gov.uk HMRC interest rates.
How many points can I get before I'm fined?▼
The quarterly-filer threshold is 4 points. At this point a £200 fixed penalty triggers. Each subsequent late submission earns another £200. Below the threshold, points are removed 24 months after each missed deadline; at or above, you need a clean 12 months PLUS to clear outstanding submissions.
What's the soft landing for first-year MTD?▼
There are TWO separate soft landings, announced in Autumn Budget 2025:
- Late submission soft landing: Phase 1 cohort only (qualifying income over £50,000, mandated 6 April 2026). No penalty points for the first four quarterly updates of 2026/27. Does NOT cover the Final Declaration. Does NOT extend to Phase 2 or Phase 3 cohorts.
- Late payment soft landing: any taxpayer in their first year of MTD. The grace before any late-payment penalty extends to 30 days (from the usual 15). The day-15 penalty is waived entirely. Day-30 penalty still triggers if unpaid at day 30; day-31+ daily accrual still applies.
Source: ICAEW Autumn Budget 2025 analysis.
Do I get a grace period for late payment?▼
Yes. Normally HMRC's late payment penalty triggers at day 15 of being late. In your first year of MTD (any cohort), this extends to day 30, and the day-15 3% penalty is waived entirely. Only the day-30 3% (or 4% from 2027/28) applies if you're still unpaid at day 30.
What's the difference between late submission and late payment penalties?▼
- Late submission = filing your quarterly update or Final Declaration after the deadline. Earns penalty points. £200 fixed at threshold.
- Late payment = paying the tax owed (on the Final Declaration) after the due date. Triggers percentage penalties on unpaid tax.
These can apply independently or together. The soft landings cover them separately.
How is HMRC interest calculated?▼
Late payment interest is set at the Bank of England base rate + 4%. As of 9 January 2026, the rate is 7.75% per annum, calculated daily on the unpaid balance from day 1 (no grace period for interest, separate from penalty). Source: gov.uk HMRC interest rates.
What's the £3,000 digital records penalty?▼
If you don't keep digital records in MTD-recognised software, HMRC can impose up to £3,000 per quarterly period under Schedule 24 of Finance Act 2021. This is separate from the points-based regime and is discretionary, applied case by case when records are missing or incomplete. Not included in this tool's totals.
Why does this tool say Phase 3 is 'planned'?▼
Phase 1 (April 2026, income over £50,000) and Phase 2 (April 2027, income over £30,000) are in current legislation. Phase 3 (April 2028, income over £20,000) is government policy intent. HMRC's eligibility guidance states the government has "set out plans to introduce legislation to lower the qualifying income threshold." The exact start date will be confirmed when the legislation passes. We assume the same penalty regime applies if Phase 3 takes effect on schedule.