HMRC plans to introduce a new points-based system to replace automatic fines in a significant revamp of the self-assessment tax process. Presently, individuals face an immediate £100 penalty for late submission of their self-assessment tax returns. However, with the upcoming changes, a £200 fee will be imposed once a specified number of points is accumulated.
The points system will be determined by the frequency of required self-assessment submissions. Those under the current self-assessment scheme will receive a point for late tax return submissions. If the deadline is missed again within a two-year span, an additional point and a £200 fine from HMRC will be incurred.
From April 2026, the Making Tax Digital initiative will expand to encompass a wider audience, including sole traders and landlords with an annual income exceeding £50,000. Under this digital system, individuals will be mandated to report their earnings quarterly. Missing the deadline on four occasions within two years will result in four points and a £200 penalty.
The Telegraph has reported the recent implementation of the points system for 100 taxpayers involved in a Making Tax Digital trial. According to the newspaper, this system will be gradually extended to other self-assessment filers.
An HMRC spokesperson emphasized their commitment to aiding customers in accurate tax compliance to prevent fines. The new penalty points structure aims to penalize only Making Tax Digital participants who consistently fail to meet deadlines.
The Making Tax Digital rollout will gradually incorporate lower income thresholds, reducing to £30,000 from April 2027 and further to £20,000 from April 2028. Individuals with self-employed income below £20,000 are currently exempt from Making Tax Digital requirements, but compliance entails the use of compatible accounting software.
A list of third-party Making Tax Digital-compliant products can be found on the GOV.UK website. Updated deadlines for Making Tax Digital compliance are available for reference.