HMRC Penalties for Late MTD Submissions: What Landlords Risk

Missing an MTD deadline might seem like a minor issue, but HMRC's penalty regime is designed to escalate quickly. The points-based system means that while your first late submission does not trigger a fine, you are accumulating penalty points that will eventually result in cash penalties. Understanding exactly how the system works is essential for avoiding unnecessary costs.

The Points-Based Late Submission Penalty

HMRC uses a points-based system for late submissions under MTD ITSA. Each time you miss a quarterly submission deadline, you receive one penalty point. The penalty threshold for quarterly submissions is four points.

Once you reach the threshold, you receive a £200 penalty. Every subsequent late submission while you are at or above the threshold triggers another £200 penalty. The fines continue for each late submission until you bring your compliance up to date.

Here is how it works in practice for a landlord with quarterly submission obligations:

• 1st late submission: 1 point, no fine
• 2nd late submission: 2 points, no fine
• 3rd late submission: 3 points, no fine
• 4th late submission: 4 points, £200 fine
• 5th late submission: Still at threshold, another £200 fine

Resetting Your Penalty Points

You can reset your penalty points to zero by meeting two conditions: you submit all outstanding returns, and you then meet every deadline for a continuous period of compliance. For quarterly obligations, this period is 12 months (four consecutive quarters submitted on time).

This means that if you accumulate four points and receive a £200 fine, you need to submit four consecutive quarterly returns on time before your points reset. One more late submission during the compliance period restarts the clock.

Late Payment Penalties

Separate from late submission penalties, HMRC charges penalties for late payment of tax. These are calculated as a percentage of the outstanding amount:

• Day 1-15 after due date: No penalty (grace period)
• Day 16-30: 2% of the tax outstanding at day 15
• Day 31 onwards: An additional 2% of the tax outstanding at day 30, plus a daily rate of 4% per annum on the outstanding balance until payment is made

The late payment penalties apply to any tax balance that remains unpaid after the payment due date. For MTD quarterly payments on account, the due dates are linked to the submission deadlines.

Interest on Late Payments

In addition to penalties, HMRC charges interest on any tax paid late. The interest rate is the Bank of England base rate plus 2.5%. Interest accrues daily from the date the payment was due until the date it is received. Unlike penalties, there is no grace period for interest.

End of Period Statement and Final Declaration Penalties

The annual End of Period Statement (EOPS) and Final Declaration also carry late submission penalties. These follow the same points-based system as quarterly submissions, and the points are combined across all your submission obligations.

Missing your Final Declaration deadline (31 January following the tax year) is particularly costly because it often coincides with a large balancing payment. Late payment penalties on the Final Declaration balance can be substantial if the amount owed is significant.

How to Avoid MTD Penalties

The best strategy is straightforward: submit on time, every time. Here is how to make that happen:

1. Use MTD-compatible software: LandlordGuru connects directly to HMRC and handles submissions with a few taps
2. Set up automated reminders: Do not rely on memory. Set calendar reminders or use your software's built-in deadline notifications
3. Keep records up to date: If you track income and expenses throughout the quarter, submission is simply a review-and-confirm process
4. Connect Open Banking: Automated bank feeds mean your data is always current, eliminating the rush to compile figures before a deadline
5. Submit early: You can submit a quarterly update as soon as the quarter ends. There is no advantage to waiting until the last day
6. Budget for tax payments: Set aside money each quarter for your estimated tax liability so payment is not delayed by cash flow issues

What to Do If You Miss a Deadline

If you have already missed a deadline, submit as soon as possible. The sooner you submit, the less interest accrues on any outstanding balance. Check your penalty points through your HMRC online account and plan to meet every subsequent deadline to work toward resetting your points.

If you believe you have a reasonable excuse for a late submission (such as a serious illness, bereavement, or an HMRC system failure), you can appeal the penalty. HMRC does accept genuine reasonable excuses, but routine reasons like being busy, forgetting, or finding the process confusing are unlikely to succeed.

For a complete overview of MTD requirements and deadlines, see our Making Tax Digital 2026 guide.