MTD Soft Landing 2026/27: Which Penalties Are Waived and Which Still Apply?
The MTD soft landing for 2026/27 means HMRC will not issue penalty points for late quarterly updates during the first year of Making Tax Digital for Income Tax. However, late payment penalties, Final Declaration penalties, and interest charges still apply. The soft landing covers quarterly submissions only — not everything.
If you are a sole trader or landlord earning above £50,000, this affects you directly from April 2026. But the Making Tax Digital soft landing is not as simple as "no penalties in year one." Some penalties are waived, others are not, and there is at least one concession that most guides do not mention.
Here is what you actually need to know.
What the Soft Landing Covers
The soft landing applies to quarterly update submissions only during the 2026/27 tax year.
In practice, this means:
- HMRC will not issue penalty points if you submit a quarterly update late
- You will not receive a £200 fine for reaching the four-point threshold
- This applies to all four quarterly updates due on 7 August 2026, 7 November 2026, 7 February 2027, and 7 May 2027
The idea is to give the roughly 850,000 sole traders and landlords joining MTD in April 2026 time to get used to the new system without immediately facing fines.
What the Soft Landing Does Not Cover
This is where people get caught out. The soft landing is narrower than most assume.
| Area | Covered by soft landing? | What happens if you are late |
|---|---|---|
| Quarterly updates (Q1 to Q4) | Yes — no penalty points | No points, no fines for 2026/27 |
| Final Declaration (due 31 Jan 2028) | No | Standard late filing penalties apply |
| End of Period Statement | No | Standard penalties apply |
| Late tax payments | No | Interest from day 1, penalty after 30 days |
| Incorrect or fraudulent returns | No | HMRC fraud and error penalties apply as normal |
| MTD for VAT obligations | No | Completely separate — VAT penalties unaffected |
The Final Declaration is the one that catches people off guard. It is the annual summary you submit after the end of the tax year, confirming your total income and tax liability. It is due by 31 January 2028 for the 2026/27 year, and HMRC has explicitly stated it is outside the scope of the soft landing.
The Late Payment Concession Most Guides Miss
While the MTD soft landing 2026/27 covers quarterly update submissions, there is a separate first-year concession for late payments that is worth knowing about.
How the Extended Payment Window Works
Under the new penalty regime, HMRC normally charges a late payment penalty if tax remains unpaid 15 days after the due date. But in your first year of MTD, this window is extended from 15 days to 30 days.
Here is how the late payment penalties work:
- Days 1 to 30: Interest accrues on unpaid tax, but no penalty
- After 30 days: A penalty of 2% of the outstanding amount (first-year concession — normally 15 days)
- After 6 months: A further 2% penalty on the remaining balance
- After 12 months: An additional 2% penalty
This is not the same as the soft landing — it is a separate transitional relief specifically for payments. But it means you have slightly more breathing room in your first year if a payment is a few days late.
Why This Matters
Most guides lump everything together as "the soft landing." In reality, the quarterly update relief and the payment window extension are two separate concessions — and only the first one is what HMRC officially calls the soft landing.
A Worked Example: What Actually Happens in Year One
Say you are a freelance consultant earning £65,000. Here is what your first MTD year looks like under the soft landing:
Q1 update (due 7 August 2026): You are still setting up your software and submit two weeks late on 21 August. Under the soft landing, nothing happens — no penalty point, no fine.
Q2 update (due 7 November 2026): You submit on time. No issues.
Q3 update (due 7 February 2027): You forget the deadline and submit three weeks late. Again, no penalty point because of the soft landing.
Q4 update (due 7 May 2027): You submit on time.
Payment on account (due 31 January 2027): You owe £3,000 but do not pay until 5 March — 33 days late. The first-year concession gave you 30 days, but you went over. You are charged 2% of £3,000 = £60 penalty, plus interest on the full period.
Final Declaration (due 31 January 2028): You submit on 15 February, two weeks late. This is not covered by the soft landing. You receive a late filing penalty.
The lesson: the soft landing protects you on quarterly submissions, but everything else runs on standard rules.
What Happens After the Soft Landing Ends
From 2027/28 onwards (or from year one if you are in the £30k to £50k group joining in April 2027), the full penalty points system applies:
| Event | Consequence |
|---|---|
| Late quarterly update | 1 penalty point added |
| Reach 4 points | £200 penalty |
| Each further late submission at 4 points | Another £200 penalty |
| 24 months of on-time submissions | Points reset to zero |
Four late quarterly updates in a rolling period triggers the first £200 fine, and every subsequent late submission adds another £200 on top. The only way to reset your points is 24 consecutive months of on-time submissions.
For full details, see our guide to MTD penalties for late submission.
Does the £30k to £50k Group Get a Soft Landing?
If your gross income is between £30,000 and £50,000, MTD does not apply to you until April 2027. HMRC has indicated a similar soft landing approach for this group, but it has not been formally confirmed.
Until it is confirmed, treat your first year as though standard penalties apply. If a soft landing is announced, consider it a bonus rather than something to plan around.
Should You Rely on the Soft Landing?
No. Three reasons:
Habits stick. If you submit your first quarterly update on time in August 2026, the process becomes routine. If you skip it because penalties are waived, you will have two quarters of backlog to deal with and no muscle memory for the process.
Payments are not protected. The soft landing does not cover late tax payments. You still need to pay what you owe on time, and interest starts accruing from day one on any unpaid amount.
2027/28 arrives fast. If you have not built the habit of quarterly reporting by then, you face real penalties from day one of the second year — with no safety net.
The soft landing is best thought of as insurance against honest mistakes while you learn the system, not a reason to delay getting started.
Getting Started Before the First Deadline
Your first quarterly update covers 6 April to 5 July 2026 and is due on 7 August 2026. To submit on time, you need to:
- Check whether you need MTD software — most people above £50,000 do
- Choose MTD-compatible software and connect it to HMRC
- Keep digital records of your income and expenses through the quarter
- Submit your quarterly update before the deadline
If you are a sole trader, our complete guide to MTD for sole traders walks you through every step from registration to first submission.
For a complete list of every deadline in the tax year, see our MTD deadlines 2026/27 guide. And for a broader overview of how the system works, see MTD for Income Tax 2026.
If you are not sure whether MTD applies to you, our free MTD checker takes 30 seconds and tells you exactly where you stand.
Key Dates for 2026/27
| Deadline | Date | Soft landing applies? |
|---|---|---|
| Q1 quarterly update | 7 August 2026 | Yes |
| Q2 quarterly update | 7 November 2026 | Yes |
| Q3 quarterly update | 7 February 2027 | Yes |
| Q4 quarterly update | 7 May 2027 | Yes |
| End of Period Statement | 31 January 2028 | No |
| Final Declaration | 31 January 2028 | No |
You can download all these dates to your phone or calendar app with our free MTD deadline calendar.
Summary
The MTD soft landing for 2026/27 protects you from penalty points on late quarterly updates — but nothing else. Late payment penalties, Final Declaration penalties, and interest all apply as normal. There is also a separate first-year concession extending the late payment window from 15 to 30 days. The best approach is to treat the soft landing as a safety net, not a reason to delay getting set up.
