{"id":19861,"date":"2022-07-22T16:43:46","date_gmt":"2022-07-22T15:43:46","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=19861"},"modified":"2026-03-18T12:31:39","modified_gmt":"2026-03-18T12:31:39","slug":"what-are-the-making-tax-digital-penalties","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/self-assessment-basics\/what-are-the-making-tax-digital-penalties\/","title":{"rendered":"What are the Making Tax Digital penalties?"},"content":{"rendered":"\n<p>Wondering what the making tax digital penalties are? \ud83e\udd14<\/p>\n\n\n\n<p>If you\u2019ve missed the <a href=\"https:\/\/taxfix.com\/en-uk\/tax-changes\/is-there-a-making-tax-digital-mtd-deadline\/\" target=\"_blank\" rel=\"noreferrer noopener\">deadline<\/a> and want to know what fines you could face, here\u2019s a quick rundown\u2026<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-cta-mini m-blue m-align-left\">\n    \n    <div class=\"b-cta-mini__content\">\n\n        \n        \n        <div class=\"b-cta-mini__body\">\n            <div class=\"b-block-body\"><p><span class=\"notion-enable-hover\" data-token-index=\"0\">Our <strong>Making Tax Digital (MTD) software<\/strong> for landlords and sole-traders with built-in accountant support is now live. <strong>First month for free!<\/strong><br \/>\n<\/span><!-- notionvc: 227cc3b6-c5da-4b2e-bf21-eb65dbbc1eac --><\/p>\n<ul>\n<li>Accountant-led onboarding &amp; support<\/li>\n<li>Simple-to-use software<\/li>\n<li>Affordable pricing options \u2013 from \u00a324.99\/month<\/li>\n<\/ul>\n<\/div>\n        <\/div>\n\n        \n        \n        <div class=\"b-cta-mini__action\">\n\n            <a href=\"https:\/\/taxfix.com\/en-uk\/mtd-for-itsa\/\" class=\"c-button m-large  m-mobile-fullwidth\">Learn more<\/a>\n\n\n        <\/div>\n\n        \n    <\/div>\n<\/div> <!-- .b-cta-mini -->\n\n<div class=\"c-body\">\n\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-highlight-mini m-nude m-align-left\">\n    <div class=\"b-block-body\">\n        <h2>Making Tax Digital Recap<\/h2>\n<p>If you haven\u2019t heard the news already, the government is in the process of getting small business and self-employed workers to complete their tax records entirely online. This is a part of their wider plan to switch over to a fully digitalised tax service.<\/p>\n<p>The first part of this process, otherwise known as making tax digital (MTD), came into effect for VAT-registered businesses in April 2022. Making tax digital for income tax and corporation tax is also being implemented very soon.<\/p>\n<p>If you run a small business or are classed as self-employed, then whether you like it or not, MTD will likely affect you.<\/p>\n<p>That\u2019s why it\u2019s important to understand the penalties you could face if you miss (or have already missed) the MTD deadlines.<\/p>\n\n    <\/div>\n<\/div> <!-- .b-highlight-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n<h2 class=\"wp-block-heading\">Making tax digital penalties &#8211; the breakdown<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83d\udca1 MTD late submission penalty points<\/h3>\n\n\n\n<p>Similar to speeding fines, the making tax digital penalties are based on a points system.&nbsp;<\/p>\n\n\n\n<p>Under these new rules, businesses or individuals will receive a \u2018point\u2019 every time their <a href=\"https:\/\/taxfix.com\/en-uk\/blog\/when-do-i-have-to-make-tax-digital\/\" target=\"_blank\" rel=\"noreferrer noopener\">submission deadline date is missed.<\/a> When you\u2019ve built up a certain number of points, you\u2019ll be required to pay a \u00a3200 fine.&nbsp;<\/p>\n\n\n\n<p>The threshold for how many penalty points you\u2019ll receive before paying a fine will depend on how frequently you\u2019re required to submit to HMRC. If you submit:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Monthly<\/strong> &#8211; then 5 points are needed before the penalty is applied<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Quarterly<\/strong> &#8211; then 4 points are required. This includes both VAT quarterly submissions AND quarterly updates for MTD for Income Tax<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Annual:<\/strong> then just 2 points are required<\/li>\n<\/ul>\n\n\n\n<p>Remember that separate points tallies are collected for VAT and Income Tax, meaning separate penalties could be applied to you if you miss both deadlines at the same time. In a worst-case scenario, you could end up paying two \u00a3200 fines at once! <em>Yikes!<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83d\udca1 New late submission penalty system<\/h3>\n\n\n\n<p>Alongside the penalty points, HMRC is also introducing a new late payments penalty system:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Up to 15 days after payment was due: no penalty<\/li>\n\n\n\n<li>Day 30 after the payment was due: 2% of the amount<\/li>\n\n\n\n<li>Day 31 after payment was due: 2% of what was due on day 15, PLUS 2% of what was due on day 30<\/li>\n\n\n\n<li>From day 31 onwards: 4% of the outstanding amount, applied daily<\/li>\n<\/ul>\n\n\n\n<p>But the good news about these making tax digital penalties? None of them are as harsh as the ones currently in place for submitting a late tax return or tax payment!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What\u2019s the threshold for Making Tax Digital?&nbsp;<\/h2>\n\n\n\n<p>The threshold depends on whether you\u2019re referring to MTD for VAT or for <a href=\"https:\/\/taxfix.com\/en-uk\/tax-changes\/what-is-making-tax-digital-for-income-tax\/\">Income Tax:<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Income Tax: <\/strong>When MTD comes into effect for Income Tax in April 2026, it will apply to self-employed workers and <a href=\"https:\/\/taxfix.com\/en-uk\/tax-changes\/everything-to-know-about-making-tax-digital-for-landlords\/\">landlords<\/a> who earn an annual income of \u00a350,000 or more<\/li>\n<\/ul>\n\n\n\n<p>BUT for businesses, the threshold is very different\u2026<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>VAT: <\/strong>All VAT-registered businesses with a taxable turnover either below or above the \u00a390,000 threshold must follow the MTD rules<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Is Making Tax Digital compulsory?&nbsp;<\/h2>\n\n\n\n<p>Unfortunately, yes.<\/p>\n\n\n\n<p>Unless you are classed as \u2018exempt,\u2019 the new rules apply to all VAT-registered businesses. It also applies to sole traders and landlords when MTD for Income Tax comes into effect in 2026.&nbsp;<\/p>\n\n\n\n<p>If you don&#8217;t comply with these changes, you will face the making tax digital penalties.<\/p>\n\n\n<\/div> <!-- .c-body -->\n\n<div class=\"b-cta-mini m-purple m-align-left\">\n    \n    <div class=\"b-cta-mini__content\">\n\n        \n        <h2 class=\"b-cta-mini__title\">Stay confident with MTD for ITSA.<\/h2>\n\n        \n        \n        <div class=\"b-cta-mini__body\">\n            <div class=\"b-block-body\"><p>With our fully compliant MTD- service you can focus on what matters.<\/p>\n<\/div>\n        <\/div>\n\n        \n        \n        <div class=\"b-cta-mini__action\">\n\n            <a href=\"https:\/\/taxfix.com\/en-uk\/mtd-for-itsa\/\" class=\"c-button m-large  m-mobile-fullwidth\">Learn more <\/a>\n\n\n        <\/div>\n\n        \n    <\/div>\n<\/div> <!-- .b-cta-mini -->\n\n<div class=\"c-body\">\n\n\n\n\n<h2 class=\"wp-block-heading\">Who is exempt from Making Tax Digital?&nbsp;<\/h2>\n\n\n\n<p>It is possible to apply for an exemption from making tax digital. This exemption is only for MTD for Income Tax ONLY and cannot be applied to MTD for VAT.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.gov.uk\/guidance\/apply-for-an-exemption-from-making-tax-digital-for-income-tax#:~:text=You%20will%20be%20able%20to,disability%2C%20location%20or%20another%20reason\">HMRC state<\/a> that you can apply if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\u2018It\u2019s not practical for you to use software to keep digital records or submit them (due to your age, disability, location or another reason)<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You are a practicing member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records\u2019<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What does MTD mean for accountants?<\/h2>\n\n\n\n<p>If you\u2019re an accountant with clients who are self-employed or work with businesses to complete their VAT returns, then MTD will affect you both.&nbsp;<\/p>\n\n\n\n<p>The biggest point to take away is that you must use MTD-compatible software if you don&#8217;t already. This is so you can be compliant with the new MTD rules that require businesses and the self-employed to keep digital records and send submissions using this software.&nbsp;<\/p>\n\n\n\n<p>As an accountant, you will also be required to sign up for an agent services account via HMRC. You can do this <a href=\"https:\/\/www.gov.uk\/guidance\/get-an-hmrc-agent-services-account\">here.<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Get making tax digital advice from Taxfix!<\/h2>\n\n\n\n<p>Confused by the upcoming MTD changes and the penalties you could face if you don\u2019t get sorted in time? Don\u2019t worry! Get in touch with us for some simple, one-off tax advice from one of our accredited accountants. You can learn more <a href=\"https:\/\/taxfix.com\/en-uk\/tax-advice\/\">here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wondering what the making tax digital penalties are? \ud83e\udd14 If you\u2019ve missed the deadline and want to know what fines you could face, here\u2019s a quick rundown\u2026 Making tax digital penalties &#8211; the breakdown \ud83d\udca1 MTD late submission penalty points Similar to speeding fines, the making tax digital penalties are based on a points system.&nbsp; [&hellip;]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[436,435],"tags":[417,476],"class_list":["post-19861","post","type-post","status-publish","format-standard","hentry","category-deadlines-and-penalties","category-self-assessment-basics","tag-deadlines-penalties","tag-making-tax-digital"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What are the Making Tax Digital penalties? &#8211; Taxfix<\/title>\n<meta name=\"description\" content=\"Wondering what the making tax digital penalties are? 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