What happens if I ignore Making Tax Digital? The 2027/28 rules after the October 2026 Budget

By Patrick Roper ACA, ICAEW chartered accountant. Last reviewed 1 November 2026. Figures next checked by 1 December 2026.

If you join in 6 April 2027 and miss a quarterly update in 2027/28, you get no penalty point: the Budget of 28 October 2026 confirmed a first-year soft landing for that group. You are still required to send the updates before the year-end return can be filed, the 31 January 2029 return deadline carries its own penalty, and late payment of tax costs 4% at day 15, 4% at day 30 and 10% a year after that. HMRC also signs up people who have not signed themselves up.

What changed on 28 October 2026

The Budget confirmed that people due to join Making Tax Digital for Income Tax from April 2027 will not be given penalty points for late quarterly updates for 2027/28. ICAEW reported it the same day. The same easement had applied to the first group for 2026/27 and has not been extended for them: anyone who started in April 2026 collects a point if their first 2027/28 update is late after 7 August 2027.

The easement does not apply to the year-end tax return for either year. When this page was checked on 1 November 2026, HMRC's penalties page still said points apply to quarterly updates "for tax years after 2026 to 2027", which is now wrong for the April 2027 group. Expect it to be updated.

What still applies in your first year

• The updates are still required. Four quarterly updates (deadlines 7 August, 7 November, 7 February and 7 May) have to be sent before the year-end return can be submitted through software.
• The year-end return has a points penalty. One point per missed return deadline. Four points means a £200 penalty and £200 for each further miss. From April 2027 the new penalty system applies to everyone who files a personal Self Assessment return, inside MTD or not.
• Late payment penalties. For tax owed for 2027/28: nothing up to 15 days late; 4% of the tax owed at day 15; a further 4% of what is still owed at day 30; then 10% a year on the balance, charged daily from day 31. In your first year under the new penalties you get 30 days rather than 15 before the first charge. Interest runs from day one on top.
• Digital records are still a legal requirement once you are in, whatever happens to the points.

What happens if you do nothing

1. HMRC reviews your 2025/26 return after you file it (deadline 31 January 2027) and writes if your qualifying income is over £30,000.
2. If you have not signed up by the start of the tax year, HMRC signs you up. It began doing this for the April 2026 group in September 2026.
3. From then on you owe digital records and four updates a year. Missing them in 2027/28 costs no points; missing the year-end return does.
4. From 2028/29, every late quarterly update is a point.

What the soft landing is worth

It removes the risk of a £200 penalty for a missed quarter in year one. It does not remove the work, and it does not change the year-end deadline. The sensible use of it is as slack for the first quarter while the records and the software authorisation settle, not as a year off. Four updates filed on time in 2027/28 also means no points to carry into 2028/29, when they start counting.

If your qualifying income is at or under £30,000 for 2025/26, none of this applies to you until April 2028 at the earliest, and you carry on with the annual return.