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Tax year 2026/27 Last reviewed: 25 October 2026
HMRC rules and compliance 2026/27: Making Tax Digital, penalties and deadlines
Making Tax Digital for Income Tax applies from 6 April 2026 to sole traders and landlords whose qualifying income for 2024/25 was over £50,000. You send four quarterly updates and a tax return. HMRC will not apply penalty points for late quarterly updates in 2026/27, but late tax returns and late payments are still penalised.
Tax year figures are for 2026/27, which runs from 6 April 2026 to 5 April 2027. Your 2025/26 return, due by 31 January 2027, still follows the current Self Assessment penalties. Everything here comes from GOV.UK and HMRC guidance read on 25 October 2026. For rates and allowances, see our Income Tax guide.
Main points
- Making Tax Digital (MTD) for Income Tax is required from 6 April 2026 if your qualifying income for 2024/25 was over £50,000. The threshold is over £30,000 for 2025/26, from 6 April 2027, and over £20,000 for 2026/27, from 6 April 2028.
- Qualifying income is your self-employment and property income before expenses. Salary, dividends and pensions do not count.
- You send four quarterly updates a year, due on 7 August, 7 November, 7 February and 7 May. You then submit your tax return by 31 January. GOV.UK calls it the tax return.
- HMRC will not apply penalty points for late quarterly updates in 2026/27. A late tax return still gets a point, and late payments are still penalised.
- For later tax years each missed quarterly update or tax return deadline gives a point. At 4 points you get a £200 penalty, then £200 for each further missed deadline.
- Your 2025/26 return, due by 31 January 2027, is still covered by the current Self Assessment penalties, even if you start MTD on 6 April 2026.
- You need compatible software and digital records, which you keep for at least 5 years after the 31 January deadline. HMRC does not recommend any product.
- HMRC late payment interest is 7.75% as at 25 October 2026. If you cannot pay in full, contact HMRC about a payment plan.
Who has to use Making Tax Digital for Income Tax?
You have to use it if you are a sole trader or landlord registered for Self Assessment and your qualifying income is over the threshold. The threshold is £50,000 for 2024/25, so you start on 6 April 2026. It falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Salary and dividends do not count.
| Tax year of your income | Qualifying income over | You must use MTD from |
|---|---|---|
| 2024/25 | £50,000 | 6 April 2026 |
| 2025/26 | £30,000 | 6 April 2027 |
| 2026/27 | £20,000 | 6 April 2028 |
Source: GOV.UK, find out if and when you need to use Making Tax Digital for Income Tax, read 25 October 2026. Partnerships will need to use it later, and GOV.UK has not set a date.
What counts as qualifying income?
Qualifying income is your total income from self-employment and property before expenses, which is your turnover. HMRC works it out from the Self Assessment return you submitted for the previous tax year. If you own a property jointly, your share counts.
- Counts: self-employment income and property income, before expenses.
- Does not count: PAYE employment income, your share of profit from a partnership as an individual partner, dividends (including from your own company), the State Pension and private pensions.
- HMRC reviews your return each year and writes to you if you are over the threshold. If you get no letter you still have to check for yourself whether you need to use MTD.
Take a landlord with a £60,000 salary and £12,000 of rent. Only the rent counts, so qualifying income is £12,000. That is under every threshold in the table, and qualifying income of £20,000 or less is an automatic exemption, so they keep filing a Self Assessment return as normal. GOV.UK's own example goes the other way: £25,000 of rent plus £27,000 of self-employment income is £52,000, which is over £50,000.
How do you sign up?
If you need to use MTD for 2026/27, GOV.UK says to sign up now. You must be registered for Self Assessment and have submitted a tax return in the last 2 years, and an agent can sign you up. GOV.UK also says that from September 2026 HMRC will start to sign up anyone who needs to use MTD for 2026/27 and has not signed up. HMRC then uses only the information it already holds, which may not include recent changes, so check your details. You still submit a Self Assessment return as normal for the tax year before you start. Source: GOV.UK, sign up for Making Tax Digital for Income Tax.
Can you be exempt?
If you are exempt you do not have to use MTD, but you still report your income and gains in a Self Assessment return. Some exemptions are automatic, for example if your qualifying income is £20,000 or less, if you did not have a National Insurance number before the start of the tax year, or if you are a personal representative of someone who has died.
You apply for a digitally excluded exemption if it is not reasonable for you to use compatible software. GOV.UK gives these examples: your age, a health condition or a disability stops you using a computer, tablet or smartphone; your religious beliefs are incompatible with digital communications; or you cannot get internet access at home or work because of where you live. HMRC will not accept an application if your only reason is that you previously filed a paper return, you are unfamiliar with accountancy software, you have few records to create, or it will take extra time or cost.
You apply by phone or in writing. HMRC aims to reply within 28 calendar days, and you can appeal up to 30 days after the date on the decision letter. If you are exempt in 2026/27 you stay on the current Self Assessment penalties. Sources: GOV.UK on finding out if you can get an exemption and applying for one.
Which HMRC penalties apply to you in 2026/27?
It depends on the tax year the penalty is for. Your 2025/26 return is covered by the current Self Assessment penalties. From the tax year you join MTD, points-based late submission penalties and new late payment penalties replace them. In 2026/27 no points apply to late quarterly updates, but a late tax return gets a point.
| What is late | Penalty rules that apply |
|---|---|
| 2025/26 tax return or payment, due 31 January 2027 | Current Self Assessment penalties, even if you start MTD on 6 April 2026 |
| 2026/27 quarterly updates | No penalty points |
| 2026/27 tax return, due 31 January 2028 | A penalty point |
| 2026/27 payment of tax owed | New MTD late payment penalties |
| Trusts, estates, partnerships and non-resident companies | Current Self Assessment penalties |
Source: GOV.UK, penalties for Making Tax Digital for Income Tax, read 25 October 2026. Rows two to four are for people who use MTD from the start of this tax year. If you are exempt in 2026/27 you stay on the current Self Assessment penalties.
How do penalty points work?
- You get one point for each missed deadline, even if you have more than one business. From tax years after 2026/27 that covers each quarterly update and each tax return.
- At 4 points you get a £200 penalty, and another £200 each time you miss a further submission deadline.
- MTD points are separate from any VAT points.
- Below the threshold, each point is removed automatically 24 months after the missed deadline.
- At the threshold, points are not removed one by one. To clear them all you must send your quarterly updates and tax returns on time for 12 months and send everything still outstanding for the previous 24 months.
- In some exceptional circumstances, such as insolvency, HMRC may cancel a penalty or points. HMRC writes to you about each penalty, and the letter explains how to appeal.
- If you volunteer for MTD, late quarterly updates get no penalty, late tax returns still get points, and at 2 points you get a £200 penalty.
Say a sole trader misses six submission deadlines in a row from 2027/28 and none of the points has expired. The first three give points 1 to 3 and no charge. The fourth point brings a £200 penalty, and the fifth and sixth missed deadlines are £200 each. That is three charges of £200, or £600.
What are the current Self Assessment penalties?
| Penalty | When | Amount |
|---|---|---|
| Late filing | Deadline missed | £100 |
| Late filing | After 3 months | £10 a day, up to £900 |
| Late filing | After 6 months | A further 5% of the tax due or £300, whichever is greater |
| Late filing | After 12 months | Another 5% or £300, whichever is greater |
| Late payment | After 30 days | 5% of the unpaid tax |
| Late payment | After 6 months | 5% of the unpaid tax |
| Late payment | After 12 months | 5% of the unpaid tax |
Source: GOV.UK, Self Assessment penalties. You also pay interest on tax paid late. You must pay a penalty within 30 days of the notice, and you can appeal if you have a reasonable excuse.
Suppose a taxpayer owes £4,000 for 2025/26 and files the return and pays more than 12 months late. Filing penalties are £100 plus £900, plus £300 at 6 months and £300 at 12 months, which is £1,600. 5% of £4,000 is £200, so the £300 minimum applies. Late payment penalties are 3 x £200 = £600. The total is £2,200, plus interest. On a bill of £8,000, 5% is £400, which is more than £300, so £400 would apply.
What do you send HMRC, and when?
You send four quarterly updates a year, due on 7 August, 7 November, 7 February and 7 May, then a tax return by 31 January after the tax year ends. For 2026/27 that return is due on 31 January 2028. A quarterly update is a summary of your income and expenses, not a tax return.
| Update | Standard update period | Calendar update period | Deadline |
|---|---|---|---|
| 1 | 6 April to 5 July | 1 April to 30 June | 7 August 2026 |
| 2 | 6 April to 5 October | 1 April to 30 September | 7 November 2026 |
| 3 | 6 April to 5 January | 1 April to 31 December | 7 February 2027 |
| 4 | 6 April to 5 April | 1 April to 31 March | 7 May 2027 |
Source: GOV.UK, send quarterly updates, read 25 October 2026. Each update covers the tax year so far, so the periods all start on 6 April, or on 1 April for calendar periods.
What is in a quarterly update?
- Totals for each income and expense category, worked out by your compatible software from your digital records. HMRC does not receive individual receipts or invoices.
- You do not need to make accounting or tax adjustments before you send one.
- If you had no income or expenses in a period you must still send the update.
- After you send one you can get an estimate of your tax bill so far. It is less accurate if you have other income that HMRC does not know about.
- You send each update for every self-employment and property business you have. All your UK properties count as one UK property business.
Standard or calendar update periods?
Standard periods follow the tax year and are the default in your software. Use calendar periods if your accounting period runs from 1 April to 31 March. The deadlines are the same for both. You must choose calendar periods before you send your first update, and you cannot change after that.
When can you send an update?
You can send an update any time after the end of the update period, up to and including the deadline. You can also send it up to 10 days before the end of the period if you do not expect to record any more transactions. HMRC will not apply penalty points for a late quarterly update in 2026/27, but you must send all four before you can submit your tax return.
What does the tax return add?
The tax return is due by 31 January after the end of the tax year. You still file a Self Assessment return as normal for the tax year before you start MTD, so your 2025/26 return is due by 31 January 2027. For later years you complete and submit it in your MTD software.
- HMRC adds the information it holds, such as PAYE employment income, pensions, other taxable state benefits and Marriage Allowance claims. You must check it.
- You add anything missing, such as savings interest, dividends and your share of partnership profit.
- You cannot claim a tax refund in the MTD tax return.
- MTD does not change the way you pay tax or when payments are due.
Sources: GOV.UK on submitting your tax return and quarterly updates.
What digital records and software do you need?
You need compatible software and digital records of your self-employment and property income and expenses. You must also keep your original documents or copies, such as bank statements and invoices. Keep digital records for at least 5 years after the 31 January submission deadline. HMRC does not recommend any product.
What must you record digitally?
- Self-employment income and expenses, and property income and expenses. For each record you note the amount, the date and the category.
- Create the records before the update deadline, and as close to the date of the transaction as you can. If you sign up part way through the year you catch up from the start of the tax year.
- You do not have to keep digital records of dividends, savings interest, pensions or a partnership profit share, though you can choose to.
- It is your responsibility to check that your digital records are accurate before an update is sent.
What are digital links?
If you use more than one software product, you must link your records digitally. Once a record has been sent in a quarterly update you must not move it by hand: you must not copy it by writing it into another cell or product, or use cut and paste or copy and paste. GOV.UK lists ways to link records, including linked cells in spreadsheets, importing and exporting XML or CSV files, an automated data transfer and an API transfer.
A spreadsheet can therefore work if its cells are linked and a bridging product makes the submissions to HMRC. You do not need to link software that is not used to create digital records of your self-employment or property income, such as a till system, or software that only submits the tax return. Source: GOV.UK, create digital records.
How do you choose software?
GOV.UK describes two types: software that creates digital records, for example from your bank feed, scanned receipts or manual entry, and software that connects to records you keep elsewhere, such as spreadsheets. The software must create and store digital records, send quarterly updates, let you add other income and submit your tax return. Free products are available for simple tax affairs but may have limits. HMRC runs a software finder tool, and all software listed has been through its recognition process. HMRC does not recommend any product or provider, so no brands are named here. Source: GOV.UK, choose the right software.
How long do you keep records?
| Records | How long |
|---|---|
| MTD digital records | At least 5 years after the 31 January submission deadline for the tax year |
| Self Assessment records if you are not self-employed | At least 22 months after the end of the tax year if you send the return on time, or 15 months after you send it if it is late |
| Self Assessment records if you are self-employed | At least 5 years after the 31 January submission deadline |
Sources: GOV.UK, keeping your pay and tax records and Taxes Management Act 1970 section 12B. The Act treats a person who lets property as carrying on a trade for this rule.
The 2026/27 tax return is due on 31 January 2028. Keep the digital records for at least 5 years after that, which is until 31 January 2033. GOV.UK's example for someone who is not self-employed: a 2024/25 return sent online by 31 January 2026 means keeping records until at least the end of January 2027.
If you do not keep the records you need for a correct and complete return, you can be charged a penalty of up to £3,000 for the tax year under section 12B. GOV.UK also says HMRC can charge a penalty if your records are not accurate, complete and readable. If records are lost you can use provisional or estimated figures and say so in the 'Any other information' box on the tax return.
What happens if you pay HMRC late?
HMRC charges late payment interest from the first day, 7.75% as at 25 October 2026. Under the new MTD rules a 2026/27 payment 31 days or more late also gets 3% at day 15 and 3% at day 30, plus 10% a year. If you cannot pay, contact HMRC as soon as possible about a payment plan.
How much is late payment interest?
HMRC interest rates are set in legislation and follow the Bank of England base rate. Late payment interest is the base rate plus 4% from 6 April 2025. The rate was 7.75% from 9 January 2026, which is the rate as at 25 October 2026, and it changes when the base rate changes. Source: GOV.UK, HMRC interest rates for late and early payments.
What are the new MTD late payment penalties?
| Payment | Payment for 2026/27 | Payment for 2027/28 |
|---|---|---|
| Up to 15 days late | No penalty | No penalty |
| 16 to 30 days late | 3% of the tax owed at day 15, or no penalty if it is your first year | 4% of the tax owed at day 15, or no penalty if it is your first year |
| 31 days or more late | 3% at day 15 and 3% at day 30, plus 10% a year on the amount outstanding from day 31, for up to 2 years | 4% at day 15 and 4% at day 30, plus 10% a year from day 31, for up to 2 years |
Source: GOV.UK, penalties for Making Tax Digital for Income Tax. The penalties apply to a balancing payment and to amounts due after an amendment or assessment, not to payments on account.
In your first year of the new penalties you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan. After your first year it is 15 days. You get the 30 days once only, so someone who volunteered and is now required to use MTD keeps 15 days. Late payment interest is charged on top from the first day.
These late payment penalties apply from the tax year you join Making Tax Digital for Income Tax, so for 2026/27 they include everyone required to use it from 6 April 2026, while earlier tax years and trust, estate, partnership and non-resident company returns stay on the current Self Assessment penalties.
Suppose a taxpayer owes a £10,000 balancing payment for 2026/27 and pays it 60 days late. The penalties at day 15 and day 30 are 3% each, which is £300 + £300 = £600. The 10% a year charge on £10,000 is £1,000 a year, about £2.74 a day, for the 30 days from day 31 to day 60, which is £82.19. Interest at 7.75%, if the rate did not change, is about £2.12 a day for 60 days, which is £127.40. Added together: £300 + £300 + £82.19 + £127.40 = £809.59, or 8.10% of the bill. HMRC works out the exact figures by its own day count.
What if you cannot pay?
GOV.UK says you may be able to set up a payment plan if you cannot pay a tax bill in full. HMRC also uses the name Time to Pay. You can check if you are eligible and set one up online. If you cannot, tell HMRC how much you can repay each month, what you earn and spend, and what savings or investments you have. For help with problems paying, see HMRC's payment problems contact page.
- HMRC checks that the plan is affordable. If you cannot agree one, it asks you to pay in full.
- HMRC expects you to use savings or assets to reduce the debt as far as you can.
- You usually pay around half of what is left each month after rent, food, utility bills and fixed outgoings.
- There is no time limit on how long a plan can last, and paying faster means less interest.
- For the new MTD late payment penalties, if a plan is agreed and you keep to it, penalties are paused from the date you contacted HMRC.
- You cannot appeal against HMRC's decision on a plan, but you can make a complaint.
For example, you have £600 left each month after rent, food, utilities and fixed outgoings. HMRC would usually ask for around half, which is £300 a month. A £3,600 bill would then take 12 months to clear, plus interest. These figures are an illustration, not an HMRC quote.
For what HMRC can do if you do not agree a plan, see our Debt Management guide. Source: GOV.UK, if you cannot pay your tax bill on time.
HMRC compliance and Making Tax Digital FAQs
Do I still file a Self Assessment return under Making Tax Digital?
Yes. GOV.UK calls it the tax return. You file your 2025/26 return as normal by 31 January 2027. For later years you complete and submit it in your MTD software by 31 January after the tax year, so the 2026/27 return is due on 31 January 2028.
Do late quarterly updates get penalty points in 2026/27?
No. HMRC will not apply penalty points for late quarterly updates for 2026/27, but you must send them before you can submit your tax return. A late tax return still gets a point. From later tax years each missed quarterly update gets a point, and 4 points bring a £200 penalty.
I earn £60,000 as an employee and £12,000 in rent. Do I need Making Tax Digital?
Your salary does not count, so your qualifying income is the £12,000 of rent. That is below the £50,000, £30,000 and £20,000 thresholds, and £20,000 or less is an automatic exemption. You keep filing a Self Assessment return as normal.
Can I be exempt from Making Tax Digital?
Yes. Some exemptions are automatic, for example if your qualifying income is £20,000 or less. You can apply if you are digitally excluded, for example because of age, a health condition or disability, religious beliefs or no internet access. A previous paper return or unfamiliarity with software is not enough.
Which software do I need?
You need compatible software that creates and stores digital records, sends quarterly updates and lets you submit your tax return. Bridging software can connect to a spreadsheet. HMRC does not recommend any product, and its software finder tool lists the products that have been through its recognition process.
What if my software fails or I lose my records?
If HMRC issues a penalty, you usually have 30 days to contact HMRC or appeal, and you explain why with dates. For computer problems, give the date you tried to file or pay and any system error message. If records are lost, you can use provisional or estimated figures and say so on the return.
How long must I keep my records?
Keep MTD digital records for at least 5 years after the 31 January submission deadline for the tax year. For Self Assessment, someone who is not self-employed keeps records for at least 22 months after the tax year ends if the return is on time. Self-employed people keep them for 5 years after the deadline.
What happens if I cannot pay my tax on time?
Contact HMRC as soon as possible. You may be able to set up a payment plan, and HMRC usually asks for around half of what you have left each month after regular outgoings. Interest is 7.75% as at 25 October 2026. Under MTD, penalties pause from the date you contacted HMRC if a plan is agreed and kept.
Where can you read more?
UK Tax hub
All the UK tax guides in one place.
Income Tax
Rates, allowances and National Insurance for 2026/27.
Property and Landlord Tax
Rental income, expenses and the Section 24 tax reduction.
Debt Management
Options if you cannot pay, and HMRC payment plans.
Planning and Strategies
Tax planning guides for 2026/27.
Calculators and tools
Tax calculators for 2026/27.
Primary sources
- GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
- GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax
- GOV.UK: Sign up for Making Tax Digital for Income Tax
- GOV.UK: Find out if you can get an exemption from Making Tax Digital for Income Tax
- GOV.UK: Send quarterly updates
- GOV.UK: Create digital records
- GOV.UK: Submit your tax return
- GOV.UK: Choose the right software for Making Tax Digital for Income Tax
- GOV.UK: Penalties for Making Tax Digital for Income Tax
- GOV.UK: Self Assessment penalties
- GOV.UK: HMRC interest rates for late and early payments
- GOV.UK: If you cannot pay your tax bill on time
- GOV.UK: Keeping your pay and tax records
- GOV.UK: Disagree with a tax decision or penalty
- Taxes Management Act 1970, section 12B
What should you do next?
Check your qualifying income against the thresholds, then choose compatible software and start your digital records. Put the four update deadlines and 31 January in your diary. If you think you may not be able to pay a tax bill in full, contact HMRC as soon as you know.
Check your qualifying income for 2024/25, and look ahead to the £30,000 and £20,000 thresholds.
Sign up (or ask your agent to) and choose compatible software.
Create digital records from the start of the tax year and send each quarterly update by its deadline.
If you cannot pay a bill in full, contact HMRC about a payment plan.
TaxYZ provides educational information only and is not regulated by the FCA or ICAEW. All deadlines, thresholds and penalty rates reflect the 2026/27 tax year as published by HMRC on GOV.UK. This page does not constitute tax, legal or financial advice. If you are unsure of your Making Tax Digital obligations, consult a qualified tax adviser or accountant before acting.