Penalties for not keeping digital records
The penalty for a failure to keep or preserve adequate digital records under MTD can be up to £3,000. This is not a theoretical threat; it is a real penalty that HMRC has the authority to impose.
- For a Single Failure: HMRC can charge a fixed penalty of up to £3,000 for each distinct failure to keep or preserve the required digital records.
- For Ongoing Failures: If a business continues to fail to keep digital records, HMRC can also impose a daily penalty of between £5 and £15 for every day the requirement is not met, which can quickly accumulate.
This penalty applies to a fundamental failure to comply with the MTD rules, such as not using HMRC-recognised software, having breaks in the “digital journey” (e.g., manually copying figures from one spreadsheet to another), or failing to keep records in the required digital format.
With MTD for Income Tax Self Assessment (ITSA) while there is a “soft landing” period for penalties for late quarterly submissions in the first year, this does not apply to the requirement to keep digital records.
You can use excel if its digitally linked to the quarterly filing and we can help you with this
When late payment penalties apply
In your first year of new penalties, you have 30 days from the payment due date to either:
- make full payment
- contact HMRC to set up a payment plan
After 30 days, we’ll start to apply penalties. After your first year, this reduces to 15 days.
You will only receive the 30-day period once — if you have volunteered and are now required to use Making Tax Digital for Income Tax, you will continue to have 15 days.
The following table shows how late payment penalties will apply, depending on the tax year the payment is for.
| Penalties for 2026 to 2027 tax year | Penalties for 2027 to 2028 tax year | |
| Payment up to 15 days late | No penalty | No penalty |
| Payment 16 to 30 days late | 3% of the tax owed at day 15, or no penalty if it’s your first year | 4% of the tax owed at day 15, or no penalty if it’s your first year |
| Payment 31 days or more late | 3% of the tax owed at day 15, and 3% of the tax owed at day 30
Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to 2 years |
4% of the tax owed at day 15, and 4% of the tax owed at day 30
Plus, an annual rate of 10% per year on the outstanding amount, charged daily from day 31 until the tax is paid, or for up to 2 years |
