From 6 April 2026, two penalty tracks govern MTD ITSA filings. A points-based late-submission regime (up to a £200 trigger at 4 points), and the Spring Statement 2025 accelerated late-payment schedule for unpaid tax: 3% of the outstanding amount at day 15, a further 3% at day 30, and 10% per annum accruing from day 31 onwards. The numbers are sharper and earlier than the legacy non-MTD schedule most landlords are used to; the financial difference becomes material at the £10,000+ unpaid-tax level. This page works the figures through.
The rule summary lives in our six headline changes overview; the practical action-list for landlords who have already received an HMRC letter lives in our HMRC letter action page. This page does not re-walk either; it owns the worked-example floor, with explicit numbers across the milestone days for three representative unpaid-tax sizes.
The new MTD ITSA penalty regime in one paragraph
Late submission generates points; 4 points triggers a £200 fixed penalty. Late payment of tax generates a schedule of percentage-based penalties: 3% at day 15, a further 3% at day 30, 10% per annum from day 31. Both regimes apply concurrently (a missed quarterly update plus a late balancing payment can generate both kinds of penalty in the same year). HMRC interest on overdue tax sits on top of both penalty regimes as a separate calculation under TMA 1970 s.86. The figures below worked-example the late-payment side specifically; the late-submission points cycle is also walked.
Late submission: points accumulation and the £200 trigger
A landlord on the standard MTD ITSA quarterly cycle has 4 deadlines per year: 7 August, 7 November, 7 February, 7 May. Plus the annual end-of-period statement and final declaration, both due 31 January following year-end. Each missed quarterly update accrues 1 point; the annual EoPS and final declaration each generate 1 point if missed, but the annual obligation operates on a separate 2-point threshold.
The £200 fixed penalty triggers at 4 points on the quarterly cycle. Each further missed submission while at 4 points generates another £200. The trigger is fixed; it does not scale with the size of the underlying tax bill, so a landlord with £500 of quarterly profit owing and a landlord with £50,000 of quarterly profit owing both face the same £200 penalty for missing the same quarter.
Points reset to zero after 24 months of full compliance, measured from the most recent missed submission. A landlord with 2 points who then submits every subsequent quarterly update on time for 24 months returns to zero; if they miss a third submission inside the 24-month window, all three points age together, and the clock effectively re-starts from the most recent miss. The reset mechanism only operates below the £200 trigger; once £200 is paid the penalty is permanent.
Worked example: a landlord misses one quarterly update
A 5-property landlord forgets the 7 November 2026 quarterly deadline (Q2 of 2026/27, covering July-October trading). The submission lands on 14 November, one week late. Outcome: 1 point. No financial penalty. The point sits as a record until 14 November 2028 (24 months later), at which point it drops off provided no further submissions are missed in the interim.
The landlord submits the remaining quarterly updates (Q3, Q4) and the year-end EoPS / final declaration all on time, and submits 2027/28's four quarters all on time. By November 2028, the original point clears. By the end of 2028/29 the landlord is back at zero points with no financial cost from the one-off November 2026 miss.
Worked example: a landlord misses four quarterly updates (the £200 trigger)
A different landlord struggles with the rhythm in the first mandate year. They miss Q1 2026/27 (7 August deadline), Q2 (7 November), Q3 (7 February 2027), and Q4 (7 May 2027). Four points; £200 penalty triggers on the fourth miss.
If they then submit on time for Q1 2027/28 (7 August 2027) and Q2 (7 November 2027), they remain at 4 points but generate no further £200 penalties. Each further missed submission from this position generates another £200; a fifth miss (say Q3 2027/28) would generate a second £200 (total £400 penalties to date).
The 24-month reset clock runs from each missed submission. The Q1 2026/27 miss clears 7 August 2028; the Q2 2026/27 miss clears 7 November 2028; and so on. As points age off the rolling window, the tally drops; the landlord falls below the 4-point trigger as the oldest points clear, then back to zero after the most recent missed submission ages off.
The 24-month rolling reset, walked carefully
The 24-month rolling window is the most operationally subtle part of the points mechanic. A landlord at 4 points (£200 paid) who then submits perfectly for 24 months has each of the 4 points clear off in date order: the oldest point clears 24 months after its original missed deadline, then the next-oldest, then the next, then the most recent. By 24 months after the FOURTH original miss, the landlord is back to zero. Provided no further submissions are missed in that window.
If a fifth submission is missed at month 12 of the recovery period, the original 4 points are still on the rolling window, the fifth point joins them at 5 total, the £200 trigger is re-met (in the strict sense the landlord is already at 4 from the start; the fifth miss generates an additional £200). Each of the 5 points then needs 24 months from its respective miss date to clear.
The clean operational rule: the rolling reset starts from the most recent miss, not from the date of the £200 penalty payment. The £200 is a permanent record of the trigger event; the rolling-window mechanic governs only the underlying point count.
Late payment: the 15/30/31 + 3%/3%/10% schedule (Spring Statement 2025)
From 6 April 2026, MTD ITSA late-payment penalties follow the Spring Statement 2025 schedule. The verbatim wording from the Spring Statement 2025 document on gov.uk is: "The new rates will be 3% of the tax outstanding where tax is overdue by 15 days, plus 3% where tax is overdue by 30 days, plus 10% per annum where tax is overdue by 31 days or more."
Three triggers, two fixed-percentage one-off penalties plus an accruing annualised rate. The 3% at day 15 is a one-off calculation against the unpaid tax outstanding on that day; the further 3% at day 30 is similarly a one-off calculation; the 10% per annum runs as a continuous accrual from day 31 onwards until the tax is paid. Cumulatively, after the first 30 days the landlord has paid 6% of the original unpaid figure in one-off penalties, then continues to accrue at 10% per annum on whatever remains unpaid.
Worked example A: £2,000 of unpaid MTD ITSA tax
| Days overdue | Cumulative penalty | What happened |
|---|---|---|
| 14 | £0 | No penalty yet |
| 15 | £60 | First 3% trigger fires (3% of £2,000) |
| 29 | £60 | Still 3% (no further trigger yet) |
| 30 | £120 | Second 3% trigger fires (cumulative 6% of £2,000) |
| 31 | £120 + accrual starts | 10% per annum accrues from this day on the unpaid balance |
| 90 | £153 | £120 fixed + (59/365 × 10% × £2,000) = £120 + £32.33 |
| 180 | £202 | £120 fixed + (149/365 × 10% × £2,000) = £120 + £81.64 |
| 365 | £304 | £120 fixed + (334/365 × 10% × £2,000) = £120 + £183.01 |
Plus HMRC interest on the overdue tax at the late-payment rate (currently around 7.5% per annum); over 365 days at 7.5% on £2,000, that is approximately £150 of interest on top of the £304 of penalty. Total cost at one year: roughly £454 on top of the original £2,000 tax.
Worked example B: £10,000 of unpaid MTD ITSA tax
| Days overdue | Cumulative penalty | What happened |
|---|---|---|
| 14 | £0 | No penalty yet |
| 15 | £300 | First 3% trigger fires (3% of £10,000) |
| 30 | £600 | Second 3% trigger fires (cumulative 6% of £10,000) |
| 90 | £762 | £600 fixed + (59/365 × 10% × £10,000) = £600 + £161.64 |
| 180 | £1,008 | £600 fixed + (149/365 × 10% × £10,000) = £600 + £408.22 |
| 365 | £1,515 | £600 fixed + (334/365 × 10% × £10,000) = £600 + £915.07 |
Plus interest at 7.5% on £10,000 over a year: roughly £750. Total cost at one year: approximately £2,265 on top of the original £10,000 tax. The penalty alone is roughly 15% of the original unpaid figure; with interest, the effective cost of a year of delay is approximately 22.5% of the bill.
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Worked example C: £30,000 of unpaid MTD ITSA tax
| Days overdue | Cumulative penalty | What happened |
|---|---|---|
| 14 | £0 | No penalty yet |
| 15 | £900 | First 3% trigger fires (3% of £30,000) |
| 30 | £1,800 | Second 3% trigger fires (cumulative 6% of £30,000) |
| 90 | £2,285 | £1,800 fixed + (59/365 × 10% × £30,000) = £1,800 + £484.93 |
| 180 | £3,025 | £1,800 fixed + (149/365 × 10% × £30,000) = £1,800 + £1,224.66 |
| 365 | £4,545 | £1,800 fixed + (334/365 × 10% × £30,000) = £1,800 + £2,745.21 |
Plus interest at 7.5% on £30,000 over a year: roughly £2,250. Total cost at one year: approximately £6,795 on top of the original £30,000 tax. At this level of unpaid balance, the 12-month delay cost equals roughly 23% of the bill; the cumulative figure makes the cost of any short-term cash-flow decision (delaying payment to fund other obligations) genuinely material.
The legacy schedule contrast: why MTD ITSA is the harsher regime
The non-MTD income-tax late-payment regime (FA 2021 Sch 26) continues to apply to taxpayers below the MTD threshold, to the partnership cohort while MTD for partnerships remains deferred, and to other non-MTD income-tax categories. The legacy schedule: 2% from day 31, a further 2% from day 46, 4% per annum from day 91. By way of contrast for the same £10,000 bill 180 days late:
| Regime | Day 15 penalty | Day 30 penalty | Day 90 penalty | Day 180 penalty |
|---|---|---|---|---|
| Legacy non-MTD (FA 2021 Sch 26) | £0 | £0 (first 2% trigger is day 31) | £200 (first 2% only) | £499 (£200 + £200 + 89/365 × 4% × £10k) |
| MTD ITSA (Spring Statement 2025) | £300 | £600 | £762 | £1,008 |
Two patterns to notice. First, the MTD regime hits earlier (first penalty at day 15 vs day 31). Second, the MTD regime hits roughly double the legacy figure at every later milestone (£1,008 vs £499 at day 180 on a £10,000 bill). The Spring Statement 2025 framing was the "doubling and acceleration"; both descriptions are accurate.
HMRC interest on overdue tax: separate from the penalty schedule
Interest on overdue tax under TMA 1970 s.86 runs from the original due date of the tax (not from the day-15 penalty trigger). HMRC's late-payment interest rate is Bank of England base rate plus 2.5%; the rate updates with each base-rate decision, typically within a few weeks. As of mid-2026 the rate is around 7.5% per annum; it has been higher in past cycles.
Interest accrues continuously from the original due date until full payment, regardless of the penalty position. A landlord on a time-to-pay arrangement (which pauses penalty accrual) still accrues interest at the prevailing rate. Interest is calculated on the unpaid balance, so partial payments reduce the interest-accruing base.
Interest is not tax-deductible. Late-payment penalties are not deductible either (no penalty paid to HMRC is allowable as an expense). The cost of a year of delay on a £10,000 bill is roughly £1,008 of penalty plus £750 of interest, all non-deductible, against a tax liability that would have been £10,000 paid on time. The effective marginal cost of delay sits above the 17% mark at the one-year horizon.
First-year-of-mandate context: HMRC's expected stance
HMRC has historically taken a relatively lenient approach to penalties in the early period of a new digital mandate. The precedent is MTD for VAT, where HMRC was generally willing to accept reasonable-excuse appeals for first-year penalties from taxpayers making genuine attempts at compliance. The official line for MTD ITSA from 6 April 2026 includes a 'familiarisation period' framing; the formal penalty regime applies from day one but HMRC has signalled a softer enforcement posture for landlords making good-faith attempts.
Practical advice for the first mandate year: plan as if the penalty regime is fully active. The lenient-enforcement posture is HMRC discretion, not a statutory waiver; treating any leniency as a bonus rather than a baseline avoids the trap of relying on a discretion that may not be granted in your specific case. If you do get hit with a first-year penalty and believe you have a reasonable-excuse case, lodge the appeal; the historic record suggests it's worth the attempt.
Where this page sits
The penalty figures above are the locked house position for the MTD ITSA cohort. The broader rule summary (digital records, quarterly cycle, EoPS, final declaration, software, threshold, the penalty regime as one of six headline changes) is in our six headline changes overview. The action-list for landlords who have received an HMRC letter triggering MTD-specific action is in our HMRC letter action page. The qualifying-income gross-test that decides whether you are in scope at all is in our qualifying income gross-vs-net page; the quarterly deadline calendar is in our quarterly deadlines page.
For joint-owner couples (both spouses' filings each face the penalty regime independently), the joint-owner quarterly-filing mechanics page covers the operational discipline that prevents one spouse missing a deadline while the other meets it. The agent-route mechanic (ASA authorisation) covered in our ASA walkthrough page matters here too; if your accountant is filing on your behalf, missed-deadline accountability is a contractual matter between you and the firm, but the penalty notice arrives in your name.
The bottom line on MTD ITSA penalties
The points-based late-submission regime is forgiving up to the £200 trigger and slowly forgiving via the 24-month reset after; the late-payment schedule is sharper than the legacy non-MTD regime and hits earlier (day 15 vs day 31). At £10,000 of unpaid tax for six months, the new schedule generates roughly double the legacy penalty. At £30,000 of unpaid tax for twelve months, the penalty plus interest is around £6,800 on top of the original bill, a cost that justifies almost any short-term funding alternative. The discipline is to file the quarterly updates on time (to avoid points) and to pay the tax on time (to avoid the schedule); where cash flow is the issue, engage HMRC's time-to-pay service before the day-15 penalty trigger fires.