HMRC uses a points-based system for MTD penalties. Here's exactly how it works.
The Points System
Each time you miss a deadline, you get 1 penalty point. When you reach 4 points, you receive an automatic £200 fine. After that, each further missed deadline is another £200.
- 1 missed deadline = 1 point (no fine yet)
- 2 missed deadlines = 2 points (no fine yet)
- 3 missed deadlines = 3 points (no fine yet)
- 4 missed deadlines = 4 points = £200 fine
- 5th missed deadline = another £200 fine
How Do Points Expire?
Points expire after 24 months of full compliance — meaning you've submitted everything on time for 2 years. You also need to have filed all outstanding returns before the clock starts.
Late Payment Penalties (Separate)
- 30 days late: 2% of tax owed
- 6 months late: Additional 2% (total 4%)
- 12 months late: Additional 4% (total 8%)
- Plus interest at Bank of England base rate + 2.5%
The Simple Way to Avoid All Penalties
File on time, every time. Set calendar reminders for 7 August, 7 November, 7 February, and 7 May. Your software will also remind you.