New Penalties and Key Rules for MTD UK for Self-Employed Individuals

Published by oana on July 21, 2025

Who Will Be Affected by MTD UK in the Coming Years

The rollout of MTD is being phased in based on annual income thresholds:

From April 2026: individuals earning over £50,000
From April 6, 2027: those earning between £30,000 and £50,000
From April 2028: anyone earning more than £20,000 annually

The UK government is also exploring ways to include individuals with incomes below £20,000 in the future.

What MTD UK Means for Self-Employed Individuals

If you’re self-employed or earn rental income, under MTD you will be required to:

Maintain your accounting records digitally
Submit quarterly updates to HMRC
File a final end-of-period statement each year

These requirements apply to sole traders, landlords, and small business owners who fall within the MTD income thresholds.

You can read the official government guidance on MTD to find out more.

New HMRC Penalties from April 2025

To encourage timely compliance, HMRC has increased penalties for late payments and late filing of tax returns. These apply both to VAT-registered businesses and early adopters of MTD for Income Tax.

Updated penalties include:

15 days late: 3% of the amount due (previously 2%)
30 days late: still 3%
From day 31 onwards: 10% annual penalty (up from 4%) plus daily interest

Those who remain under the traditional Self Assessment system will follow a different set of penalty rules.

Why It’s Important to Prepare Early

For many UK-based self-employed individuals and landlords, these changes can feel overwhelming at first. But preparing for MTD UK now means fewer surprises later, better control over your tax obligations, and avoiding costly penalties.

Working with an accountant who understands both the UK system and the specific needs of small business owners and freelancers can help you:

Choose the right MTD-compatible accounting software
Submit accurate quarterly updates
Avoid common mistakes and unnecessary fines

At IPA Group, we provide expert digital accounting services for self-employed professionals, landlords, and small business owners across the UK. Whether you’re preparing for MTD, need help with quarterly submissions, or want to avoid costly penalties, our team is here to guide you every step of the way.