Taxpayers joining Making Tax Digital (MTD) for Income Tax from 6 April 2027 with qualifying income exceeding £30,000 will not receive penalty points for late submission of their first four quarterly updates during the 2027/28 tax year.

This easement applies to late submission penalty points for quarterly updates only. Taxpayers will still be required to submit their quarterly updates before they can submit their end-of-year tax return. The measure provides new entrants with a year to familiarise themselves with the reporting requirements and digital processes under MTD.

Under HMRC’s points-based penalty system, taxpayers receive a penalty point for each missed submission. Once the relevant threshold of four points is reached for quarterly obligations, a £200 penalty is charged, with further £200 penalties for subsequent missed submissions while the taxpayer remains at or above the threshold.

The Budget documents also clarified that MTD will not apply to certain groups, including those eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople, and expected non-resident customers. For guidance on current and future exemptions from Making Tax Digital (MTD) for Income Tax, please see this link.

Taxpayers entering MTD from April 2027 should nevertheless prepare for the new requirements, including ensuring that suitable software and record-keeping processes are in place. The easement does not remove the obligation to comply with MTD reporting requirements.