Compliance
Compliance Update: HMRC Moves to Tighten Late-Payment Rules Under Making Tax Digital
From April 2025, HMRC is increasing late-payment penalties for VAT and Self-Assessment taxpayers, particularly as part of Making Tax Digital, signalling more stringent compliance expectations.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## New Penalties Under MTD and Deadlines
From **6 April 2025**, the UK government will implement sharper late-payment penalties for taxpayers under VAT and income tax Self Assessment, especially among those required to join **Making Tax Digital (MTD)**. The new structure is:
- **3%** charge if tax liability is overdue by **15 days**;
- An additional **3%** if overdue by **30 days**;
- **10% per annum** for amounts remaining unpaid after **31 days or more**. ([gov.uk](https://www.gov.uk/government/publications/supporting-documents-for-spring-statement-2025/spring-statement-2025-policy-costings?utm_source=openai))
## Expansion of MTD for Income Tax Self Assessment
Sole traders and landlords with **gross income over £50,000** from self-employment and property in the 2024-25 tax return will need to comply with MTD requirements from **April 2026**. That means digitally keeping records and submitting quarterly updates using HMRC-compatible software. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-129/issue-129-of-agent-update?utm_source=openai)) Agents can begin signing up for testing now. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-129/issue-129-of-agent-update?utm_source=openai))
## What This Means for Compliance Burden
- **Quarterly reporting cycles** replace annual filings for those over thresholds — more frequent compliance, faster cash flow management needed.
- **Software compatibility matters**: ensure records flow from book-keeping tools to HMRC via digital link.
- **Penalties kick in quickly**: delays of even two weeks can trigger 3% penalty. Over 30 days overdue compounding charges.
## Practical Advice for Taxpayers & Advisors
- **Check eligibility** now: if income or property rental gross receipts exceed £50,000, begin system upgrades early.
- **Sign up for the testing programme**: benefits include support and reducing teething issues before compulsion. ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-129/issue-129-of-agent-update?utm_source=openai))
- **Improve cash flow forecasting** to avoid overdue liabilities past 15 or 30 days.
- **Train staff or advisors** on digital MTD submissions; double-check reconciliations and data accuracy to avoid penalties.
- **Automate where possible**, especially recurring expenses, invoicing, and rent income, to maintain up to date records.
## Example Situation
**Marcus** is a landlord with an annual rental income of £60,000 and some consulting self-employment income. Under the new regime from April 2026, because his gross income from property + self-employment exceeds £50,000, he must use MTD and submit quarterly figures. If any payments or partnered tax liabilities are delayed beyond 15 days, a 3% penalty arises; beyond 30 days another 3%. Marcus should adopt accounting software now, ensure early cash reserves, and perhaps prepay some liabilities where possible.
## Bottom Line
- Be proactive: eligibility, systems, cash flow.
- Accurate, timely digital submissions will avoid penalties.
- Advisers must advise clients to prepare well ahead of compulsion in 2026.