At Southside Accountants in Wimbledon, we have observed increasing confusion among clients regarding MTD deadlines and the associated penalties. This article outlines the key information you need to remain compliant and avoid unnecessary fines.
Understanding Making Tax Digital Penalties
Making Tax Digital (MTD) is a UK government initiative aimed at transforming the tax system to make it more effective, efficient, and easier for taxpayers. By digitising tax administration, MTD seeks to reduce errors and simplify the process of tax reporting for individuals and businesses. Official HMRC guidance.
Making Tax Digital Components for Income Tax
1. Digital Record-Keeping
Taxpayers must use MTD-compatible software to keep digital records of their income and expenses. This ensures accurate and up-to-date information is maintained throughout the tax year.
2. Quarterly Updates
From 6 April 2026, all landlords and sole traders with income over £50,000 will be legally required to submit quarterly updates to HMRC under Making Tax Digital for Income Tax Self Assessment (ITSA).
Every three months, you must send HMRC a summary of income and expenses for each self-employment or property business. These updates are cumulative, meaning they include figures from the start of the tax year up to that quarter’s end.
Important: These updates can be submitted either by the taxpayer or by an accountant on their behalf. Southside Accountants in Wimbledon can manage this process for you to ensure all deadlines are met accurately and on time.
Quarterly update deadlines:
- 6 April to 5 July – due by 5 August
- 6 July to 5 October – due by 5 November
- 6 October to 5 January – due by 5 February
- 6 January to 5 April – due by 5 May
3. Final Declaration and Making Tax Digital Penalties
Once the tax year ends, you or your accountant must submit a Final Declaration by 31 January following the end of the tax year — starting with the 2026/27 tax year. This replaces the Self Assessment tax return and confirms all income, including employment, pensions, savings, and reliefs.
It also includes any corrections or adjustments that would previously have been made in an End of Period Statement (EOPS), which HMRC has now removed for simplicity.
Removal of the End of Period Statement (EOPS)
Previously, taxpayers were required to submit an End of Period Statement (EOPS) for each income source. HMRC has now removed this requirement to simplify MTD ITSA. All necessary confirmations and adjustments are now made within the Final Declaration.
Making Tax Digital Penalties for Non-Compliance
Points-Based Penalty System
HMRC uses a points-based system for late submissions:
- Quarterly submissions: £200 penalty after 4 points
- Monthly submissions: £200 penalty after 5 points
- Annual submissions: £200 penalty after 2 points
After reaching the threshold, each subsequent missed submission incurs another £200 penalty. To reset points to zero, you must submit on time for 12 months and ensure all outstanding submissions are complete.
£400 On-the-Spot Fine
Failing to use MTD-compatible software for VAT returns can result in an immediate fine of up to £400 per return.
Applicability to Limited Companies
MTD for Income Tax does not apply to limited companies, as they file Corporation Tax returns. However, HMRC plans to roll out MTD for Corporation Tax no earlier than April 2026. It is advisable for companies to begin preparing by using compatible digital record-keeping software.
How Southside Accountants Can Assist
We offer comprehensive support to ensure MTD compliance:
- Guidance on selecting and using MTD-compatible software
- Submitting quarterly updates to HMRC on your behalf
- Preparing and filing Final Declarations
- Strategies to avoid penalties and maintain compliance
Explore our services or browse our latest articles.
Take Action Now
Delaying compliance with MTD can lead to penalties and unnecessary stress. Contact Southside Accountants in Wimbledon today for support tailored to your business needs.
