How HMRC’s New Points-Based Penalty System Works
MTD ITSA uses a fundamentally different penalty system from the old Self Assessment regime. Instead of a flat immediate fine for any late submission, HMRC has introduced a points-based system that gives a degree of tolerance for occasional lateness while severely penalising persistent non-compliance.
Every missed quarterly submission deadline earns one penalty point. Points accumulate over time. When your total points reach the threshold for your filing frequency, a financial penalty is triggered.
The Points Threshold — When Financial Penalties Apply
| Filing Frequency | Points Threshold | Financial Penalty Triggered |
|---|---|---|
| Quarterly (MTD ITSA) | 4 points | £200 |
| Monthly | 5 points | £200 |
| Annually | 2 points | £200 |
For quarterly MTD ITSA filers, this means you can miss up to three deadlines in a row before incurring a financial penalty — though each missed deadline still earns a point that brings you closer to the threshold.
Miss four consecutive quarterly deadlines — that is approximately one year of non-compliance — and you face a £200 penalty plus £200 for every further late submission until your points are reset. With five misses, you owe £400. With six misses, £600. The costs compound rapidly.
How Penalty Points Expire
Penalty points do not expire automatically with time. They expire only after a period of compliance — a sustained run of on-time submissions. For quarterly filers:
- Points below the threshold expire after 24 months of no new points being accrued
- Once the threshold is reached and a financial penalty is triggered, the point count resets to zero only after submitting 4 consecutive on-time returns (for quarterly filers)
Late Payment Penalties Under MTD ITSA
Separate from the submission penalty system, HMRC applies late payment penalties if your tax bill is not paid by 31 January:
| How Late | Penalty |
|---|---|
| Up to 15 days late | No penalty (grace period) |
| 16–30 days late | 2% of the unpaid tax |
| 31 days – 6 months late | 4% of the unpaid tax (cumulative) |
| 6 months – 12 months late | Additional 4% (8% total) |
| Over 12 months late | Additional penalty — up to 100% in serious cases |
Late payment interest also accrues daily from the due date at HMRC’s prevailing interest rate (currently base rate + 2.5%), compounding the cost of delayed payment.
Penalties for Inaccurate Returns
If HMRC identifies inaccuracies in your quarterly updates or Final Declaration that result in understated tax, behaviour-based penalties apply:
| Type of Inaccuracy | Maximum Penalty |
|---|---|
| Careless (reasonable care not taken) | 30% of potential lost tax |
| Deliberate but not concealed | 70% of potential lost tax |
| Deliberate and concealed | 100% of potential lost tax |
Penalties are reduced where errors are disclosed voluntarily and promptly. HMRC distinguishes between unprompted disclosure (you tell them before they ask) and prompted disclosure (you tell them after an enquiry has begun).
How This Compares to Old Self Assessment Penalties
| Old Self Assessment | New MTD ITSA Points System |
|---|---|
| £100 immediate fine for any late return | No immediate fine — points accumulate first |
| Further £10/day after 3 months (up to £900) | £200 per submission once threshold reached |
| £300 or 5% of tax after 6 and 12 months | Separate late payment penalty structure |
| Applied per tax year | Applied per missed submission |
Practical Example: How Points and Penalties Accumulate
Emma is a landlord who becomes disorganised after a difficult year with tenants and misses quarterly submissions:
- Q1 missed (August 2026): 1 penalty point — warning, no financial penalty
- Q2 missed (November 2026): 2 penalty points — still no financial penalty
- Q3 filed on time (February 2027): No new point — still at 2 points
- Q4 missed (May 2027): 3 penalty points
- Final Declaration missed (January 2028): 4 points reached → £200 financial penalty triggered
- Q1 2027/28 missed: 5th point → additional £200 penalty
Emma now faces £400 in penalties and must file 4 consecutive on-time submissions before her points reset to zero.
How to Avoid MTD ITSA Penalties
- Engage an accountant early — AccTek tracks every deadline and files on your behalf; you will never miss a submission deadline due to forgetting
- Keep records updated regularly — monthly record updates make quarterly submissions quick and straightforward
- Set calendar reminders — even with AccTek managing submissions, being aware of upcoming deadlines is good practice
- Respond promptly to accountant requests — AccTek may need clarification on a transaction before filing; prompt responses ensure deadlines are met
- Don’t ignore HMRC correspondence — HMRC will notify you when points are accruing; address these immediately
Frequently Asked Questions
Zero penalties, guaranteed compliance
AccTek handles every quarterly submission on your behalf — you will never receive a penalty point for a missed filing date.