Sage Explains UK's New HMRC Penalties for Late Tax Submissions
Sage has released a guide detailing the UK tax authority's (HMRC) new penalty system for late submissions and payments under the Making Tax Digital (MTD) initiative.
Sage, a company specializing in UK tax software, has issued a comprehensive explanation of the UK tax authority's (HMRC) new penalty regime for the Making Tax Digital (MTD) initiative. The updated system introduces specific consequences for both late submissions and late payments, particularly impacting sole traders and landlords who will be phased into MTD for Income Tax from April 2026.
The new rules outline a points-based system for late submissions. Instead of an immediate financial penalty for each missed deadline, taxpayers accrue penalty points. Upon reaching a set threshold of points, a £200 penalty is issued. Crucially, penalty points for MTD for Income Tax are separate from those applied to MTD for VAT.
A "soft landing" period is in effect for the initial four quarterly updates for those mandated from April 2026. Following this, from April 2027, the reformed penalty system will also apply to most Self Assessment taxpayers not yet required to follow MTD for Income Tax. This aligns the penalty approach across different tax obligations.
Sage's guide clarifies when these new penalties take effect, details the mechanics of the points system, and provides practical advice for taxpayers to ensure compliance. The initiative aims to encourage timely submissions and help businesses avoid unnecessary financial penalties by adhering to regular filing deadlines.