Penalties for Income Tax Self Assessment volunteers
Changes to penalties for Making Tax Digital for Income Tax volunteers, during the testing phase.
Changes to penalties
New late submission penalties and late payment penalties will apply to you, if you volunteer to test the Making Tax Digital for Income Tax service. Once these apply to you, they’ll replace the existing penalties for the current tax year, and tax years that follow.
The new late submission penalties are points-based. This means you will not face financial penalties if you make a single mistake. Financial penalties will only apply if you persistently fail to meet your obligations. You will not get any late submission penalty points for missing quarterly updates during the testing phase.
The new late payment penalties are more proportionate to the amount of tax you owe, and how long it takes you to pay it.
HMRC can also apply penalties if you do not give us the information we need to calculate the amount of tax you should pay.
Read more about signing up for Making Tax Digital for Income Tax.
How to agree to the new penalties
To take part in the Making Tax Digital for Income Tax testing phase, you need to confirm that you want the new penalties to apply to you. There are different ways to do this.
If you volunteer from April 2024, you’ll do this as part of signing up to Making Tax Digital for Income Tax. You’ll need to confirm, within the service, that you agree for the new penalties to apply to you.
If you volunteered to join the service before 6 April 2024, we’ll write to you and explain what you need to do.
You will not be able to change your mind once you’ve agreed that the new penalties apply to you.
The new penalties will only apply to your personal Income Tax Self Assessment. They will not apply to Self Assessment in any other capacity, such as being a trustee, or to partnerships.
If you’re an authorised agent, you can agree to the new penalties on behalf of your clients.
When the new penalties will apply to you
We’ll only confirm the new penalties apply to you, once we’ve checked that:
- you’re eligible to sign up to the service, and have completed the process
- you have been testing the service
- we have moved your records over to our new IT platform
If these steps are not completed in the tax year when you agree to the new penalties, we’ll continue checking in the tax years that follow.
Once all the steps are completed, we’ll send you a letter to confirm that the new penalties apply to you.
The current penalties will still apply to your previous tax years.
There may be some customers who have to stop testing the service, due to specific changes in their circumstances. We’ll write to you to confirm if this applies to you. Our letter will explain how this affects penalties.
This table shows the main deadlines for payments and submissions. These are what the new penalties will apply to during the testing phase.
| Quarterly updates | Online annual return due | Balancing payment due | ||
|---|---|---|---|---|
| Making Tax Digital for Income Tax volunteer in tax year 2024 to 2025 | No penalties apply | 31 January 2026 | 31 January 2026 | |
| Making Tax Digital for Income Tax volunteer in tax year 2025 to 2026 | No penalties apply | 31 January 2027 | 31 January 2027 |
Late submission penalty points
There are no late submission penalties for missing quarterly updates, during the testing phase of Making Tax Digital for Income Tax.
You may be required to use Making Tax Digital for Income Tax from either 6 April 2026 or 6 April 2027. This will depend on your total annual income from self-employment or property.
If you’re required to use Making Tax Digital for Income Tax, you’ll have to submit quarterly updates. You’ll get late submission penalties if you miss the deadlines for these.
Find out if and when you need to use Making Tax Digital for Income Tax.
How late submission penalties work
Late submission penalties work on a points-based system.
For each annual return you submit late, you’ll get a penalty point, until you reach the penalty point threshold of 2 points.
When you reach the threshold, you’ll get a £200 penalty. You’ll also get another £200 penalty if you miss the deadline for submitting any more annual returns, while you’re at the penalty point threshold.
If you’re also registered for VAT, your penalty points for Income Tax Self Assessment are separate to your penalty points for VAT.
Removing penalty points
If you have not reached the penalty point threshold, we’ll remove your individual penalty point automatically. This will happen about 24 months after you get it.
If you have reached the threshold for penalty points, you’ll need to take action to reset them to zero. You can do this by completing a period of compliance.
A period of compliance is when you submit all your obligations on time. If you volunteer for Making Tax Digital for Income Tax, you’ll need to complete a 24 month period of compliance. This means you must submit your next 2 annual obligations on time.
During the testing phase, your quarterly updates will not be considered for the period of compliance.
Late payment penalties
If your payment is more than 15 days overdue, we’ll start to apply late payment penalties to you.
Late payment penalties can apply to any Income Tax Self Assessment payments not paid in full, by the relevant due date. This could include:
- balancing payments
- amounts due following an amendment, or assessment
Late payment penalties do not apply to any payments on account that you may need to make.
For late payment penalties, the sooner you pay, the lower the penalty amount will be.
From the first day your payment is overdue, until you pay in full, we’ll charge late payment interest.
This table shows how late payment penalties will apply.
| First late payment penalty | Second late payment penalty | |
|---|---|---|
| Payment up to 15 days overdue | None | None |
| Payment between 16 and 30 days overdue | Calculated at 2% on the tax you owe at day 15 | None |
| Payment 31 days or more overdue | Calculated at 2% of what was outstanding at day 15, plus 2% of what is still outstanding at day 30 | Calculated at a daily rate of 4% per year on the outstanding balance This will be charged every day from day 31, until the outstanding balance is paid in full |
If you cannot pay on time
Contact HMRC as soon as possible if you’re having difficulty paying your Income Tax by the deadline.
To avoid higher penalties, you should either:
- pay what you owe in full, on or before the due date
- contact us to apply for a payment plan
Setting up a payment plan may stop your late payment penalties from increasing.
Making an appeal
We will send you a penalty decision letter if you get a:
- late payment penalty
- late submission penalty point
- £200 late submission penalty
If you do not agree with our decision, check when and how to appeal against it.