HMRC plans to introduce a new points-based system to replace automatic fines in a significant overhaul of the self-assessment tax process. Currently, a late submission of a self-assessment tax return incurs an immediate £100 penalty. However, under the upcoming system, individuals will face a £200 charge after accumulating a specific number of points.
The allocation of points will be tied to the frequency of self-assessment submissions. Those under the existing system will receive a point for late tax return filings. If a deadline is missed again within a two-year span, another point will be added, along with a £200 fine from HMRC.
From April 2026, Making Tax Digital, a new digital platform, will expand its reach to include more individuals. Sole traders and landlords earning over £50,000 annually will be mandated to adopt the new tax reporting mechanism.
Under Making Tax Digital, income reporting will occur quarterly. Missing four deadlines within two years will result in accumulating four points and a £200 fine. The Telegraph reveals that the points system was recently piloted with 100 taxpayers involved in the Making Tax Digital trial, with plans to extend it to other self-assessment filers.
An HMRC spokesperson emphasized a commitment to assisting customers in accurate tax compliance to avoid penalties. The revised penalty points system aims to penalize only Making Tax Digital users exhibiting consistent late filing behavior.
The gradual implementation of Making Tax Digital will encompass lower income thresholds, reducing to £30,000 in April 2027 and further to £20,000 by April 2028. Individuals earning under £20,000 through self-employment are currently exempt from the Making Tax Digital requirements, necessitating the use of compatible accounting software for compliance.
A variety of third-party Making Tax Digital-compliant software products are listed on the GOV.UK website. The updated deadlines for Making Tax Digital compliance are available for reference.