Making Tax Digital expands – and so do the penalties for getting it wrong 

The Spring Statement quietly introduced some major tax changes that could catch many self-employed individuals, landlords, and small business owners off guard, especially those not keeping a close eye on deadlines. 

Two updates stand out: a tougher approach to late tax payments and a wider rollout of the Government’s Making Tax Digital (MTD) scheme.  

Together, they signal a move towards tighter compliance, more frequent reporting, and steeper costs for falling behind. 

New penalties for late payment – A sharper sting from April 

Currently, there is a short grace period after your tax deadline where no financial penalty kicks in, as long as you settle your tax bill within 15 days.  

After that, penalties of two per cent (rising to four per cent at 30 days) are applied. 

However things will get stricter from April.  

For taxpayers within the MTD system, late payments will attract a higher charge: 

• Three per cent if the tax is unpaid after 15 days 

• Six per cent if still unpaid after 30 days 

• Plus a 10 per cent annualised penalty applied after 31 days, accumulating daily 

The aim is to encourage prompt payment, but missing deadlines could cost significantly more, particularly for those with tight cash flow or administrative challenges. 

Who is affected and when? 

These changes apply to taxpayers using MTD for VAT already and will extend to individuals in the MTD for Income Tax Self-Assessment (ITSA) system as they are phased in. 

If you are a sole trader or landlord earning over £50,000, you will enter MTD from April 2026.  

Those earning above £30,000 will follow in April 2027.  

Thanks to the latest update, those with an income over £20,000 will be brought into scope from April 2028. 

This means thousands more will be required to keep digital records and submit updates to HMRC every quarter rather than just once a year. 

What should you do now? 

If you are not already using digital tools to manage your accounts, now is a good time to make the switch.  

Switching to cloud accounting software or working with an accountant who’s MTD-ready could make a real difference, not just in terms of compliance but also peace of mind. 

It is also worth reviewing your income threshold.  

You might not be caught by MTD just yet, but one good year could change that.  

Planning ahead gives you the chance to adjust your systems and habits before you are legally required to. 

More frequent reporting, harsher penalties, and fewer excuses for lateness are the outcomes of the Chancellor’s message in the Spring Statement.  

If you are unsure how this affects you or want help putting the right systems in place, get in touch with our team of accountancy professionals today.