From 6 April 2026, Making Tax Digital for Income Tax (MTD ITSA) becomes mandatory for many self‑employed associate dentists and landlords. While most headlines focus on quarterly submissions, the bigger issue for dentists is often misunderstood: penalties.
Many dentists have been told, or assume, that “there are no penalties under MTD for their first year”. That’s not quite true.
Penalties are temporarily deferred for 26/27— but they are not scrapped, and they are coming for 27/28.
A completely new penalty system
MTD introduces a brand‑new penalty regime for late submissions and late payments. This system mirrors the points‑based penalties already used for VAT and represents a major change to how Self Assessment penalties work.
Even more importantly, it was confirmed in the 2025 Budget that these new penalty rules will apply from April 2027 to all Self Assessment taxpayers, including those not within MTD. This means dentists who assume they are “too small” or “out of scope” may still be affected in the near future.
How the points‑based penalties work
Under the new system, HMRC does not issue an immediate fine for a late filing.
Instead:
- Each missed deadline gives you a penalty point
- Once you hit a threshold, a £200 penalty applies
- Further late submissions trigger additional £200 penalties
- Points and penalties can be appealed if there is a reasonable excuse
The key thresholds dentists need to know
| Filing obligation | Points before a £200 penalty |
|---|---|
| Annual only (Self Assessment) | 2 points |
| Quarterly (MTD) | 4 points |
Dentists mandated into MTD are treated as quarterly filers, even though they still submit an annual tax return. That creates a single four‑point threshold covering all submissions — quarterly updates and the MTD tax return combined.
What about dentists with multiple income sources?
This is common.
For example:
- An associate dentist with self‑employed dental income, and
- Rental income from a buy‑to‑let property
Under MTD, quarterly updates are required for each business. However, HMRC will only ever issue one penalty point per quarter, regardless of how many updates are due at that deadline.
In practice, this means:
- A maximum of five points per tax year
- Four relating to quarterly updates
- One for the MTD tax return
How dentists remove points and stop penalties
If a dentist stays below the points threshold, individual points automatically expire after two years.
However, once the threshold is reached:
- A £200 penalty is charged
- Further late filings result in immediate £200 penalties
- Points no longer expire automatically
To reset points to zero, the dentist must:
- Meet a minimum period of full compliance (four on‑time submissions for quarterly filers), and
- Submit all returns due in the previous 24 months
The 2026/27 “soft landing” — helpful, but limited
HMRC has confirmed a temporary soft landing, meaning no penalty points will be charged for late quarterly updates during the 2026/27 tax year only.
This is designed to ease the transition and reduce the need for appeals while dentists adjust to quarterly reporting.
However, this relief has strict limits:
- Penalties can still apply for a late 2026/27 MTD tax return
- Dentists joining MTD after 2026/27 get no soft landing
- Quarterly updates are still legally required
- Digital records must still be kept
- The Quarter 4 update must be filed before the tax return can be submitted
The soft landing does not mean MTD can be ignored for a year.
The bottom line for dentists
✅ Penalties are deferred for quarterly updates in 2026/27 only
❌ They are not cancelled
⚠️ Full penalties apply from April 2027
Dentists who prepare early — setting up software, processes, and quarterly routines — will avoid stress, penalties, and last‑minute scrambles.
MTD is here. The grace period is short. Preparation now is far easier than damage control later.
FAQ Section
Are MTD penalties cancelled for dentists?
No. MTD penalties are not cancelled. HMRC has only deferred penalty points for late quarterly updates during the 2026/27 tax year. Penalties will apply fully from April 2027.
Do dentists have to worry about MTD penalties in 2026/27?
Yes. Even though quarterly penalties are deferred for one year, dentists must still keep digital records and submit quarterly updates. Late tax returns and late payments can still attract penalties.
How do the new MTD penalty points work?
Instead of an immediate fine, HMRC issues penalty points for missed deadlines. Once you hit the threshold (usually 4 points for quarterly filers), HMRC charges a £200 penalty, with further penalties for continued lateness.
Does the soft landing mean dentists can ignore MTD in 2026/27?
No. The soft landing only removes penalty points for late quarterly updates. Dentists must still comply with MTD rules, submit updates, keep digital records, and file Quarter 4 before submitting their tax return.
What if a dentist has dental income and rental income?
Separate quarterly updates are required for each business, but HMRC will only issue one penalty point per quarter, regardless of how many submissions are due at that deadline.
When do full MTD penalties start for dentists?
From 6 April 2027, the points‑based penalty regime applies in full. At the same time, the rules will also apply to all Self Assessment taxpayers, even those not within MTD.
Can MTD penalty points be removed?
Yes, but only if the dentist:
Meets a minimum compliance period.
Submits all outstanding returns for the previous 24 months.
Until then, further late submissions trigger automatic £200 penalties.
What should dentists do now to avoid penalties?
Dentists should:
Set up MTD‑compatible software early.
Build quarterly submissions into routine workflows. Avoid relying on the soft landing as a safety net.
Preparation now is far easier than fixing penalties later.
Dentists: Don’t Let MTD Penalties Catch You Out
MTD penalties may be deferred for 2026/27 — but they are not cancelled.
From April 2027, missed deadlines can quickly turn into £200 penalties and ongoing compliance headaches.
At SmallBiz Accounts, we specialise in helping dentists:
- Set up MTD‑ready software
- Build a simple quarterly routine
- Stay compliant without unnecessary stress
- Avoid penalties before they start
👉 Book an MTD check‑up for dentists
We’ll review your income, confirm whether MTD applies, and make sure you’re fully prepared — in plain English, not tax jargon.
