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What is Late payment penalty (MTD)?
Last verified 23 October 2026
A late payment penalty is a charge for not paying Income Tax in full by the due date under the new penalty rules that come with Making Tax Digital for Income Tax. It applies to balancing payments and amounts due after an amendment or assessment, not to payments on account.
Why it matters to landlords
The first penalty is charged if tax is still unpaid 15 days after the due date. A second penalty is added if it is still unpaid at day 30, and further charges build up after that. Interest is also charged from the first day a payment is late until you pay in full. In your first year under the new rules you get 30 days, instead of 15, to pay or contact HMRC to set up a payment plan before penalties start. You get that longer period only once.
If you agree a payment plan and keep to it, penalties are paused from the date you contacted HMRC. The 2026 to 2027 soft landing for quarterly updates does not cover late payment. The new rules apply from the tax year you join, and HMRC says they will apply to everyone filing a personal Self Assessment return from April 2027.
Example
Your balancing payment is due on 31 January and it is your first year under the new rules. You can pay, or call HMRC and agree a payment plan, within 30 days without a penalty. Interest still runs from 1 February until you pay.
MTD for Income Tax penalties →
Related terms
- Balancing payment
- Payments on account
- Late submission penalty (MTD)
- Self Assessment deadlines
- MTD penalty points