MTD Soft Landing 2026: What Penalties Are Waived in Year One?
If you have just signed up for Making Tax Digital and are worried about getting fined while you learn the ropes, there is good news. HMRC has confirmed a soft landing period for the first year of MTD for Income Tax.
Here is exactly what that means.
What Is the Soft Landing?
The soft landing means HMRC will take a lenient approach to penalties during the 2026/27 tax year — the first year that MTD for Income Tax is mandatory for those earning above £50,000.
In practice, this means:
- No penalty points for late quarterly updates during 2026/27
- HMRC will not penalise taxpayers who are making a genuine effort to comply
- The focus is on getting people into the system, not punishing early mistakes
What Penalties Still Apply?
The soft landing is not a free pass on everything. These penalties and charges still apply during 2026/27:
Late payment penalties
If you owe tax and do not pay on time: - Interest accrues from day one on unpaid tax - A penalty of 2% of the outstanding tax is charged after 30 days - A further 2% is charged after 6 months
The soft landing only covers the quarterly update submission deadlines, not payment deadlines.
Incorrect returns
If you submit deliberately incorrect information, HMRC's fraud and error penalties still apply as normal.
VAT obligations
If you are also registered for MTD for VAT, those obligations and penalties are completely separate and not affected by the Income Tax soft landing.
How the Points System Works (From 2027/28)
Once the soft landing ends, the full penalty points system kicks in. Here is how it works:
| Event | Consequence |
|---|---|
| Late quarterly update | 1 penalty point added |
| Reach 4 points | £200 penalty |
| Each further late submission | £200 penalty |
| 24 months of on-time submissions | Points reset to zero |
So in theory, you could submit three quarterly updates late without any financial penalty. But once you hit four points, every subsequent late submission costs you £200.
For full details, see our guide to MTD penalties for late submission.
Should You Rely on the Soft Landing?
No. Here is why:
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Good habits are easier to form early. If you start submitting quarterly updates on time from Q1, it becomes routine. If you skip Q1 and Q2, you will have a backlog to deal with.
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Late payment penalties still apply. The soft landing only covers the quarterly update deadlines, not your tax payments. You still need to pay what you owe on time.
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The transition is not hard. Submitting a quarterly update takes minutes if you have been keeping records through the quarter. The first one is the hardest — after that, it is the same process each time.
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2027/28 comes quickly. If you have not built the habit of quarterly reporting by then, you will be at risk of real penalties from day one of the second year.
What About the £30k–£50k Group?
If your income is between £30,000 and £50,000, MTD does not apply to you until April 2027. When it does, HMRC has indicated a similar soft landing approach for the first year — but this has not been formally confirmed yet.
The safest approach is to start using MTD software now, even if you are not yet mandated. This gives you a full year of practice before penalties can apply. You can voluntarily register for MTD to take advantage of the soft landing period with no risk.
Key Takeaway
The soft landing is a safety net, not an excuse to delay. Sign up, connect your software, and submit your first quarterly update on time. It takes less effort than you think, and you will be glad you started early when 2027/28 arrives with the full penalty regime.