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HMRC MTD Penalty Points

HMRC’s new Making Tax Digital service brings in a new system of issuing ‘penalty points’ when a submission is late.

Just like speeding fines, the points based system relates to the individual (or business if a limited company) and after so many points, financial penalties apply.

Monthly reporting

Making Tax Digital requires the quarterly submission of information electronically for your Income Tax Return. These are completed using compatible software, such as through MalgraBooks’ accounts system.

When submitted on time, no penalty points are applied – however if late, you’ll receive one point.

After four points are reached, a penalty of £200 is charged.

Do HMRC MTD penalty points expire?

Penalty points expire 2 years after being issued.

So if you have a penalty applied in July 2024, this would expire after July 2026.

However, if you reach the full penalty threshold and are charged £200, you’ll need to complete a period of ‘good behaviour’ before the counter resets to zero.

This ‘good behaviour’ period is 24 months (where everything must be on time) before you reset back to zero points.

What other charges are there?

HMRC are also reviewing the late payment system to align with the new points system.

This is automatically applied of around 2% of what was due, in addition to HMRC’s interest rate on late payments.

Can I appeal?

Yes – however you’ll need to go through a review and appeal process with HMRC.

You’ll need a reasonable excuse for being late and likely need to provide evidence to support this.

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