MTD Penalties: What Happens If You Miss Deadlines

· 3 min read

MTD Penalties: What Happens If You Miss Deadlines

Last updated: April 2026

Missing MTD deadlines or failing to comply with digital record-keeping requirements can result in significant penalties. Understanding the penalty structure helps you avoid costly mistakes.

The MTD Penalty Structure

HMRC has implemented a graduated penalty system for MTD non-compliance. Penalties are applied at two levels: quarterly reporting failures and record-keeping failures.

Quarterly Submission Penalties

If you miss a quarterly reporting deadline:

Missed DeadlinePenalty
First late submission£200 fixed penalty
Additional delaysDaily penalties accrue
3+ months lateAdditional percentage of tax due

Daily Penalty Accrual

  • 1-3 days late: £10 per day (maximum £300)
  • 4-7 days late: Additional £20 per day
  • More than 7 days: £30 per day plus percentage of tax

Percentage-Based Penalties

For persistent non-compliance:

  • 3 months late: Additional 5% of tax due (or £300 minimum)
  • 6 months late: Additional 5% (totalling 10%) of tax due
  • 12 months late: Additional 15% (totalling 25%) of tax due

Record-Keeping Penalties

Failing to maintain digital records properly also triggers penalties:

First Offence

Usually resolved with guidance and a reminder to comply. HMRC prefers to help landlords get compliant rather than penalise immediately.

Repeated Failures

  • Persistent incorrect or incomplete records
  • Using non-compliant software
  • Failure to maintain audit trails

Appeal Grounds

You may appeal penalties if:

  • Your software failed (with evidence)
  • HMRC systems were unavailable
  • Other reasonable excuse (death, serious illness, etc.)

Interest on Late Payment

Beyond penalties, interest accrues on late tax payments:

  • Interest runs from the payment deadline
  • Calculated at UK Bank Rate + 2.5%
  • Accrues daily until fully paid

Example Timeline

If your Q2 submission is due 5 October but filed 5 December:

  • Initial £200 penalty applies
  • Daily penalties for ~60 days
  • Interest on unpaid tax from 5 October
  • Potential additional percentage penalties if 3+ months late

How to Avoid Penalties

Proactive Steps

  1. Set reminders - Calendar alerts 2 weeks before each deadline
  2. Submit early - File as soon as you have the information
  3. Use reliable software - Ensure MTD compliance before deadline
  4. Maintain records continuously - Don’t let records pile up
  5. Check submission confirmations - Verify HMRC received your report

What to Do If You Miss a Deadline

If you realise you’ve missed a deadline:

  1. Submit immediately - Don’t wait for the next period
  2. Contact HMRC - Explain your situation, especially for first offences
  3. Pay any tax due - Reduce penalties by paying promptly
  4. Set up processes - Prevent future misses

Reasonable Excuse

HMRC may waive penalties if you have a reasonable excuse:

Valid Reasons

  • Death of a close relative around the deadline
  • Serious illness or hospitalisation
  • Unforeseen IT failure with evidence
  • HMRC system failures
  • Natural disasters affecting your area

Not Valid Excuses

  • Forgetting the deadline
  • Not knowing the rules
  • Being busy with other work
  • Staff changes
  • Simple errors in calculation

Try HMRC Reporter: https://hmrcreporter.com

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