MTD penalty points for driving instructors: none for late updates in 2026-27, what changes in April 2027
If you missed your first Making Tax Digital quarterly update on 7 August 2026, you did not get a penalty point. HMRC's penalties guidance says: "There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year."
That is the rule for the first year of MTD for Income Tax, which started on 6 April 2026 for sole traders with qualifying income over £50,000. Points for quarterly updates start with the 2027-28 tax year, the same April that brings in everyone over £30,000 (HMRC).
An earlier version of this article said points applied to late quarterly updates from the start, that a reset needed 24 months of compliance, and that paying the £200 penalty cleared a point. None of that matches HMRC's guidance, and we have corrected it below.
What still applies in 2026-27
No points for late updates does not mean no rules.
- You still have to send the updates. HMRC says you must send your quarterly updates before you can submit your tax return. Your HMRC online account shows any overdue updates (HMRC).
- A late tax return earns a point. The 2026-27 return is due by 31 January 2028 and is submitted through your MTD software. HMRC confirms penalty points still apply for late tax returns in 2026-27 (HMRC).
- Late payment penalties apply, under the new system set out below.
Your 2025-26 return, due 31 January 2027, still falls under the current Self Assessment penalties. HMRC gives exactly this example. Those penalties are £100 if the return is late, then £10 a day after 3 months up to £900, then further charges at 6 and 12 months of 5% of the tax due or £300, whichever is greater (GOV.UK).
How points work from 2027-28
From the 2027-28 tax year, the quarterly update deadlines (7 August, 7 November, 7 February, 7 May) count towards points, as the tax return deadline already does.
| Rule | What HMRC's guidance says |
|---|---|
| Points | One point for each quarterly update or tax return deadline you miss |
| Threshold | 4 points |
| At the threshold | £200 penalty |
| After that | £200 for each further missed deadline |
| More than one business | Still one point per deadline, even if several updates are late |
| VAT | MTD for Income Tax points are separate from VAT points |
HMRC writes to you when you get a point or a penalty, and the letter tells you how to appeal.
How points come off
Below 4 points: HMRC removes each point automatically 24 months after the missed deadline.
At 4 points: points are no longer removed one by one. To clear all of them you must meet two conditions:
- send your quarterly updates and submit your tax return on time for 12 months, and
- send any outstanding quarterly updates and tax returns for the previous 24 months.
Paying a £200 penalty is not one of the ways points are removed. HMRC's guidance lists only the automatic removal below the threshold and the two-condition reset at it, plus cancellation in exceptional circumstances such as insolvency. Your HMRC online account shows the date your points will be removed.
A worked example
Take an ADI using MTD in the 2027-28 tax year who falls behind early:
- Misses the 7 August 2027 update: 1 point.
- Misses 7 November 2027: 2 points.
- Misses 7 February 2028: 3 points.
- Misses 7 May 2028: 4 points and a £200 penalty.
- Misses 7 August 2028: another £200.
To reset, that ADI needs 12 months of on-time updates and returns, and must have sent everything outstanding from the previous 24 months. Had they stopped at 3 points, each point would have dropped off 24 months after its own deadline, the first on 7 August 2029.
Late payment penalties
Late payment penalties are separate from points and apply to each late payment. Under MTD they depend on how long you take to pay (HMRC):
| Days late | 2026-27 tax year | 2027-28 tax year |
|---|---|---|
| Up to 15 | No penalty | No penalty |
| 16 to 30 | 3% of the tax owed at day 15, or no penalty in your first year | 4% of the tax owed at day 15, or no penalty in your first year |
| 31 or more | 3% at day 15 and 3% at day 30, plus 10% a year charged daily from day 31 (for up to 2 years) | 4% at day 15 and 4% at day 30, plus 10% a year charged daily from day 31 (for up to 2 years) |
In your first year of the new penalties you have 30 days from the due date to pay in full or contact HMRC to set up a payment plan. After your first year, that drops to 15 days. Late payment penalties do not apply to payments on account. Late payment interest is charged from the first day a payment is late, at Bank of England base rate plus 4% (HMRC interest rates).
A quarterly update is a summary, not a tax return, and it is not a payment. HMRC says MTD does not change the way you pay tax or the dates payments are due.
Staying at zero points
Put the four dates in your diary now. 7 August, 7 November, 7 February, 7 May, with a reminder a week before each. You can send an update any time from the end of the period to the deadline, or up to 10 days before the period ends if you expect no more transactions (HMRC).
Keep records as you go. Each update covers the tax year to date, so if your records are current, sending one means checking figures you already have. If a quarter had no income, you still send an update to say so.
Treat the tax return as its own job. It is due 31 January, and you cannot submit it until the quarterly updates are in.
Use 2026-27 to practise. If you are in the £50,000 group, a late update costs no points this year. From 2027-28 every missed deadline counts.
Digital links and penalty points
The earlier version of this article also said a broken digital link could count as a late submission. HMRC's penalties guidance ties points to missed deadlines and does not list broken digital links as a points trigger. The linking requirement is still part of HMRC's digital records guidance, and our spreadsheet guide explains what counts as a link.
Where Orbit fits
Orbit is built on HMRC's Making Tax Digital for Income Tax API. Lesson payments and the expenses you log build your quarterly figures as you work. Orbit is completing HMRC's software recognition process, and live submissions to HMRC open once HMRC approves it; until then, send your updates through software on HMRC's compatible list. Orbit is free for instructors. For the wider picture, read our guide to Making Tax Digital for driving instructors.
Disclaimer
This article is for general information and does not constitute tax, legal, or financial advice. UK tax rules change frequently and individual circumstances vary. Consult a qualified accountant, tax adviser, or HMRC directly for advice specific to your situation. Orbit (listed with HMRC as DrivePro) is built on HMRC's Making Tax Digital for Income Tax API and is completing HMRC's software recognition process; live submissions open once HMRC approves it. It does not provide personalised tax advice.