Late Penalty Changes on Making Tax Digital for Self Employed and Landlords

We have been warning both the self employed and landlords on this website that Making Tax Digital (using approved bookkeeping software such as Sage, QuickBooks and Xero) with quarterly returns to HMRC (in the same way that most limited companies do) starts in April 2026.

MTD starts if you had

• From 06/04/2026 if you had £50,000+ turnover (income before expenses not gross profit) for tax year 2024/25 tax year.
• From 06/04/2027 if you had £30,000+ turnover (income before expenses not gross profit) for tax year 2024/25 tax year.
• From 06/04/2028 if you had £20,000+ turnover (income before expenses not gross profit) for tax year 2024/25 tax year.

Digital returns to HMRC include quarterly returns, an annual return and in addition, your self assessment tax return.  That’s 6 returns in total.

Late Filing Penalties

This is to be on a points basis on 1 point for each late filing episode.  Fines do not start until threshold points are hit:

• Fines when late quarterly filing penalties = 4 points  (in short 4 late quarters = a fine).
• Fines when late annual filing penalties = 2 points ((in short 2 late years = a fine).
• That’s a maximum of 5 penalty points per year (4 X late quarters and 1 X late annual).

Multiple Incomes = Even More Returns

• If you are self employed and a landlord, you will need to file MTD separately for self employment income and landlord income.
• If you are late for one or the other or both, you will still only receive 1 penalty point in total for that period.

Fines on Hitting Points Threshold

• £200 initial penalty.
• £200 for each subsequent late filing penalty point event (as you are already above the threshold).
• Points no longer automatically expire after two years but will only expire if:
• A full year of 4 consecutive quarterly returns have been completed on time to remove ‘quarterly’ penalty points.
• 2 consecutive annual returns (I for annual returns points).
• In short, two full years of ‘on time’ returns are required to remove all points.

Late Payment Interest on Fines

Penalty interest will be charged if fines and tax due is not paid within 15 days as follows:

• Day 15: 3% of tax outstanding.
• Day 30: a further 3% of the tax outstanding.
• Day 31 onwards: a daily penalty calculated at a rate of 10% per annum.

First Year of New Regime – 30 days not 15 Days

Late payment interest will apply from day 30 and not day 15 in tax year 2026/27 but penalty interest will be increased from 3% to 4% in April 2027.

Comment

A system designed for force all self employed and landlords to comply with MTD.  Software costs around £15 to £30pm, with some software providers offering free packages for landlords  with up to 2 or 3 properties but then charging thereafter, no doubt to attract the majority of landlords initially and then introduce a nominal fee later down the line.

Just 7 weeks to go folks!