Making Tax Digital has introduced a points-based penalty system for late submissions - much like points on a driving license. Get too many and they could add up to a £200 fine. In this guide, we breakdown how HMRC penalty points work, when they expire and how you can reset your total back to zero.
And, if you’re looking to keep your tax record clean, try Coconut for free today. With it, you can track your income and expenses in real-time, get automated deadline nudges and submit your quarterly updates directly to HMRC without stress.
What are MTD penalty points?
Every time you miss a MTD deadline, you get one penalty point. Once you reach a certain number of points, you’ll receive a £200 fine. The number of points you can receive before getting a fine depends on how often you’re required to submit. But most landlords and self-employed professionals will be on the quarterly system meaning four points will trigger a charge.
You can get a penalty point if you miss any MTD deadline and it doesn’t matter how late you are. Thankfully though, you can clear your points either by staying on time for a compliance period or by making sure all previous late submissions are filed.
How long do HMRC penalty points last?
The lifespan of your penalty points depends on whether you’ve reached the penalty threshold. If you’re below it, points stay on your record for 24 months. If, however, you’re at or above the threshold, (four points), you must submit two year’s worth of on-time filings before your points are reset.
What happens if you go above the threshold?
If you receive more than four penalty points you’ll receive:
- A £200 fine immediately
- Ongoing fines - every late filing after reaching the threshold incurs an additional £200 fine and there’s no upper cap on how many times you can be fined.
- Locked points - your points remain fixed until you meet the reset criteria.
Can you appeal HMRC penalty points?
Yes, if you have a reasonable excuse for missing the quarterly deadline, you can appeal penalty points before they result in a fine. This includes a serious illness, bereavement, unexpected hospital stay, system failure on HMRC’s side or a major disaster.
Forgetting the date, not understanding your software or simply finding MTD too complicated aren’t valid excuses.
You have 30 days of receiving the penalty notification to log your appeal through your HMRC online account.
How to reset your penalty points
As mentioned, once you hit the threshold, there is a way to wipe your record clean by one of two ways:
- Submit all outstanding returns from the previous 24 months
- Complete a period of clean compliance and submit every return on time for 12 consecutive months
Keep your points at zero with Coconut
Managing four quarterly updates on top of your final declaration means five separate filing deadlines every year but software like Coconut takes the guesswork out of your responsibilities.
In fact, thousands of sole traders and landlords are using Coconut to stay compliant and enjoying features like:
- Real-time digital record keeping
- Built-in alerts and deadline tracking
- Receipt capture
- Direct submission to HMRC
So, don’t wait for penalty points to build up. Know your obligations and let Coconut do all the heavy lifting with a free trial today.
