[05.05.25]

Making Tax Digital Income Tax starts on 6th April 2026 for those with a qualifying income above £50,000; and 6th April 2027 for those with a qualifying income above £30,000.  Those who qualify for MTD will then fall within a new penalty system for late-filing and late-payment.

In terms of late-filing of MTD Income Tax, there will be a points system, which will allow for one penalty-free late submission in a 24-month period. Each quarterly return submitted after the deadline will incur one penalty point. If no further late submissions occur within 24 months, HMRC will automatically remove the penalty point.

If the taxpayer makes a second late submission of a quarterly return before the first point has been removed, they will reach the penalty point threshold of two points and a £200 penalty will be charged. They will then remain at the threshold and incur further £200 penalties for each return submitted late until they complete a period of compliance of 24 months, which will result in the points being reset to zero.

This penalty regime is similar for Making Tax Digital VAT.

In the Spring 2025 Statement at the end of March, the Government set out increases in late payment penalties for those subject to Making Tax Digital Income Tax and VAT from 1st April 2025. The new rates have increased from 2% to 3% on any outstanding tax owed after 15 days.  A further 3% will be added where tax is overdue by 30 days, plus 10% per annum (charged on a daily basis) where tax is overdue by 31 days or more.

Castletons Accountants