Last updated: 2 March 2026
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) represents the biggest change to the tax system in decades. From 6 April 2026, self assessment taxpayers earning over £50,000 — including self-employed barristers — must keep records digitally and file quarterly updates under a new penalty regime. Introduced through Finance Act legislation, this new system replaces the old fixed £100 late-filing charge with a points-based approach. The same framework already applies to MTD for VAT; it now extends to income tax.
If you are joining MTD for the first time, understanding how late submission and late payment penalties work is essential. This guide sets out the new rules, the penalty rates, and a worked example showing what a taxpayer faces when missing a submission deadline.
How the new penalty system works
HMRC has split MTD penalties into two streams:
- Late submission penalties — a points-based system for failing to file on time
- Late payment penalties — percentage-based charges for failing to pay income tax owed, plus daily interest
A taxpayer can file on time but pay late, or file late but pay on time. In the worst case, both penalty streams apply simultaneously. For barristers juggling court commitments, knowing which stream you are exposed to helps you respond correctly.
Late submission penalties: penalty points and the threshold
Under MTD for income tax, barristers must file four quarterly updates plus a final declaration each tax year — five submissions in total. The points threshold works as follows:
| Submission frequency | Threshold | Penalty at threshold |
|---|---|---|
| Quarterly (4 per year) | 4 points | £200 penalty per late submission |
| Monthly (if applicable) | 5 points | £200 per missed filing |
Each time a taxpayer files late, one point is issued. Below the threshold, no £200 penalty is charged — the taxpayer simply accumulates points. Once you reach four points, a fixed financial penalty of £200 is charged for every subsequent missed filing. Penalty points for late submission accumulate regardless of the soft-landing period.
Points expire after 24 months of on-time filing. All outstanding returns — including your annual tax return — must be up to date before the reset takes effect.
Late payment penalties: interest and charges
The new late payment penalty regime is entirely separate from submission points. Late payment of tax triggers escalating charges the moment the due date passes:
| Time overdue | Penalty |
|---|---|
| Day 1 onwards | Interest at Bank of England base rate + 2.5% |
| 15 days overdue | First penalty: 5% of tax outstanding |
| 30 days overdue | Second penalty: additional 5% of tax outstanding |
| 12 months overdue | Annual penalty: 4% of outstanding balance |
There is no grace period — interest accrues from day one. At current rates, a taxpayer owing £15,000 accrues roughly £3.40 per day in interest before any penalties are applied. The 5% charges at 15 and 30 days are the real sting: on a £15,000 balance, the first charge alone is £750.
MTD penalties from 2026/27: the soft-landing period
HMRC has confirmed a soft-landing period for the first tax year of MTD for ITSA. From April 2026 to 6 April 2027, ITSA taxpayers can get used to the new system without facing the full consequences. This new regime means penalties for late payment still apply, but penalties for late submission are deferred:
- Submission penalties will not be financially enforced — points still accumulate but no £200 charge applies
- Payment charges and interest apply in full from day one
- Points carry forward into 2027/28, so a taxpayer who accumulates three points enters the second year one missed filing away from the threshold
The soft landing is a grace period for adjustment, not a free pass. Although no penalty is issued during 2026/27, ITSA taxpayers who are charged penalty points in year one carry them into 2027/28 when full enforcement begins.
Worked example: a barrister’s first year under MTD
Sarah is a family law barrister earning £95,000 per year. She keeps digital records using MTD-compatible software set up by Jack Ross. During the 2026/27 tax return period, she misses one quarterly update because a Crown Court trial overruns.
Consequence of the missed submission:
- 1 penalty point added (below the 4-point threshold)
- No £200 charge — soft-landing year
- The point expires after 24 months of on-time filing
Sarah also delays a payment on account by 20 days. On a balance of £12,000:
- Interest from day 1: approximately £16
- First late payment penalty at 15 days: £600 (5% of £12,000)
- Total cost: £616
The missed filing cost nothing thanks to the soft landing — but the late payment cost £616. Had Sarah’s accountant been authorised to file her returns and set up a payment reminder, both charges could have been avoided entirely.
How to avoid making tax digital penalties
Making Tax Digital is the biggest change to the tax system for barristers in decades. The most effective approach is to delegate filing to a specialist accountant. Court commitments, circuit travel, and clerk delays make self-filing risky. With the help of a tax adviser, practical steps include:
- Authorise your accountant to file MTD for income tax returns on your behalf
- Set up direct debit for tax payments to avoid overdue charges
- If you cannot pay on time, contact HMRC before the due date to arrange a Time to Pay agreement — this may reduce penalties
- Keep records up to date throughout each quarter, not just at the deadline
Jack Ross handles making tax digital compliance for barristers, including quarterly filing, fee protection insurance, and expense claims. Under the penalty regime for late filing and payment, prevention is far cheaper than cure.
Frequently asked questions
What happens if I miss one MTD quarterly update?
You receive one penalty point. No penalty charge applies unless you have already reached the 4-point threshold. The point expires after 24 months of on-time filing.
Are penalties enforced in the first year of MTD?
HMRC has confirmed a soft-landing period for 2026/27. Late submission penalties are not enforced in year one, though points still accumulate. Payment charges and interest apply in full from day one.
Can my accountant file to avoid penalties?
Yes. Your accountant can be authorised to file on your behalf — the most effective way to avoid missed submissions caused by court commitments.
How do I reset my points?
File every return and final declaration on time for 24 consecutive months, with no outstanding submissions overdue. After two years of clean compliance, your points reset to zero.
Need specialist help? Contact Jack Ross — we handle MTD filing, tax compliance, and fee protection for barristers across England and Wales.
