What Happens If I Ignore Making Tax Digital?

Making Tax Digital is mandatory, not optional. If your income exceeds the threshold, you're legally required to keep digital records and submit quarterly updates. But what actually happens if you don't?

The grace period (2026/27 only)

HMRC has confirmed a soft landing for the first year. During 2026/27, you won't receive penalty points for late quarterly submissions. This doesn't mean MTD is optional, it means HMRC is giving everyone time to adjust before enforcing penalties.

This doesn't cover your tax return or paying your tax. Penalty points still apply to a late tax return, and interest is charged on tax paid late.

From 2027/28: penalty points

From the 2027 to 2028 tax year, each missed quarterly deadline earns a penalty point. After 4 points, you receive a £200 fine, and every subsequent late submission incurs another £200 fine. Below the threshold, each point drops off 24 months after the missed deadline. Once you've hit the threshold, you need 12 months of on-time updates and returns, plus anything outstanding from the previous 24 months, to clear them. Details are in our penalties guide.

What if you just don't sign up?

HMRC knows who should be in MTD, they have your Self Assessment returns and income data from employers and platforms. Since September 2026 HMRC has been signing people up itself, in stages, using the information it already holds. Being signed up by HMRC doesn't do the work for you: you still need to keep digital records, choose software and send each quarterly update.

Ignoring MTD doesn't make you invisible. It makes you a target for compliance action.

What about filing Self Assessment instead?

MTD replaces the quarterly reporting obligation but doesn't fully replace Self Assessment yet. You'll still need a year-end tax return, similar to today's annual Self Assessment return. But you cannot substitute quarterly MTD updates with an annual Self Assessment return, they're separate requirements.

Can HMRC fine me for not keeping digital records?

Yes. The requirement to keep digital records is part of MTD legislation. HMRC can issue penalties for failure to maintain adequate records. In practice, they're more likely to pursue late submission penalties first.

The practical reality

The first year is forgiving. But from April 2027, HMRC will enforce penalties, and the income threshold drops to £30,000, bringing many more people into scope. Getting set up now, while it's calm and there's a grace period, is far better than scrambling later when penalties are live.

It takes 5 minutes

Sign up for MTD on GOV.UK, connect free bridging software like flonancial, submit any outstanding supported update and prepare for the next quarterly deadline. The process takes less time than worrying about it.