HMRC plans to implement 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 based on their submission history. Those under the existing self-assessment framework will receive a point for each late tax return submission.
If a taxpayer misses the deadline again within a two-year period, they will receive an additional point and a £200 penalty from HMRC. The transition to Making Tax Digital, a digital tax reporting system, will expand to more taxpayers starting in April 2026. Sole traders and landlords with annual incomes exceeding £50,000 will be mandated to adopt this new system.
Under the Making Tax Digital initiative, individuals will be required to report their earnings quarterly. Failure to meet the deadlines on four occasions within two years will result in the accumulation of four points and a £200 fine. The Telegraph has reported that the points system was recently introduced for 100 taxpayers participating in a Making Tax Digital trial. The system is expected to be extended to all self-assessment filers.
An HMRC spokesperson emphasized the aim of assisting customers in accurately fulfilling their tax obligations to avoid penalties. The new penalty points system aims to penalize only Making Tax Digital users who consistently miss submission deadlines. The Making Tax Digital rollout will gradually encompass lower income thresholds, decreasing to £30,000 in April 2027 and further to £20,000 in April 2028.
Individuals with self-employed incomes below £20,000 are currently exempt from the Making Tax Digital requirements. To comply with Making Tax Digital regulations, individuals must utilize compatible accounting software. A selection of third-party Making Tax Digital-compliant products can be found on the GOV.UK website. The revised deadlines for Making Tax Digital compliance are available through official channels.