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Joining MTD in April 2027? No penalty points for late quarterly updates in your first year

By Paul · Last checked against GOV.UK on · How we check facts

The Budget on 28 October 2026 included a change for people who have to join Making Tax Digital for Income Tax in April 2027. Here's what it covers, and what it doesn't.

The change

If you have to start using MTD for Income Tax in April 2027, you won't get late submission penalty points for quarterly updates in the 2027 to 2028 tax year.

You still need to send the updates. The Budget document puts it like this: "Customers will still need to send their quarterly updates before they are able to submit their tax return." So it's a gentler first year, not a year off.

Source: Budget 2026 overview of tax legislation and rates, paragraph 2.36, GOV.UK

Who it covers

You joined MTD Late quarterly updates in 2026 to 2027 Late quarterly updates in 2027 to 2028
April 2026 (over £50,000) No points Points apply, starting with the update due 7 August 2027
April 2027 (over £30,000) Not in MTD yet No points (Budget 2026)

If you've been in since April 2026, this change doesn't affect you. Your gentle year is this one. HMRC's guidance says there are no penalties for missing a quarterly update deadline in 2026 to 2027. From 2027 to 2028, late updates count.

Sources: Penalties for MTD for Income Tax and Send quarterly updates, GOV.UK

What still costs you

  • A late tax return still gets a penalty point.
  • Points add up. Under MTD, 4 points means a £200 penalty. Then it's another £200 for every deadline you miss after that.
  • Paying late has its own penalties. Under the MTD rules there's nothing for the first 15 days. In your first year that's 30 days, once. After that it's a percentage of what you owe: 4% at day 15 and another 4% at day 30, for 2027 to 2028 tax. From day 31 there's a yearly rate of 10% on what's still unpaid. Interest is charged from the first day you're late.
  • If you can't pay, contact HMRC early. If a payment plan is agreed and you keep up the payments, HMRC says penalties are paused from the date you got in touch.
  • You still need digital records and all your updates before you can submit your tax return.

Source: Penalties for MTD for Income Tax, GOV.UK

The same page says these new penalties will apply from April 2027 to everyone who sends a personal Self Assessment tax return, not just people in MTD. That's worth knowing even if you're under £30,000.

Is it law yet?

Not yet, as far as I can tell. The Budget document lists this change as a Budget measure that isn't in Finance Bill 2026-27. It doesn't say how or when it'll be brought in.

HMRC's penalties page was last updated on 30 March 2026. It hadn't caught up with the Budget when I checked on 3 November 2026. I'll update this article when it does.

Other MTD news from the same Budget

The same document (paragraph 2.37) said these groups will be exempt from MTD for Income Tax until further notice:

  • people eligible for qualifying care relief, such as foster carers or kinship carers
  • non-UK resident foreign entertainers and sportspeople
  • people expected to be non-UK resident

The government says secondary legislation will be brought in before April 2027.

It also repeated something it had said before. Some people HMRC can't offer a digital service to won't have to use MTD. That includes a small number of insolvent people who can't sign up at the moment.

HMRC's exemptions guidance hadn't been updated for this on 3 November 2026.

Source: Budget 2026 overview of tax legislation and rates, paragraph 2.37, GOV.UK

What I'd do with the extra slack

I wouldn't treat it as a reason to wait. The first year is when you find out if your software, your bank feed and your habits actually work. Use it to get into a routine:

  1. Once a week, snap your receipts and match up bank transactions. It's about ten minutes.
  2. At the end of each quarter, look over the totals.
  3. Send the update by the 7th of the following month.

Not sure when you start? Use the free checker. Still picking software? Try the software chooser.

Sources

We checked each of these on GOV.UK on 3 November 2026. If HMRC changes them, this page will change too.

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This page is general information, not tax advice. Read why. Page history: 3 November 2026, full check against GOV.UK.

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Quotes and facts from GOV.UK: contains public sector information licensed under the Open Government Licence v3.0. Quoted words are HMRC's or HM Treasury's, not ours.