HMRC plans to introduce a new points-based system to replace automatic fines, marking a significant overhaul of the self-assessment tax process.
Currently, individuals face an immediate £100 penalty for late submission of their self-assessment tax return. However, under the revised approach, a £200 charge will be imposed after accumulating a specific number of points.
The point allocation will be tied to the frequency of self-assessment submissions. Those under the existing system will accrue a point for late tax return filing. If they miss the deadline again within a two-year span, another point will be added, accompanied by a £200 fine from HMRC.
The implementation of Making Tax Digital, a digital platform expanding to a broader audience by April 2026, will mandate sole traders and landlords earning over £50,000 annually to utilize the new tax reporting system.
Under the Making Tax Digital framework, individuals will be required to report earnings quarterly. Failure to meet the deadline on four occasions within two years will result in four points and a £200 penalty.
According to reports from The Telegraph, the points system has been piloted with 100 taxpayers under Making Tax Digital. This system is expected to extend to other self-assessment filers in due course.
An HMRC spokesperson emphasized the objective of assisting customers in accurate tax compliance to avoid fines entirely. The refined penalty points scheme ensures that only Making Tax Digital users persistently missing deadlines will face financial repercussions.
The gradual integration of Making Tax Digital will include lower income thresholds, decreasing to £30,000 in April 2027 and further to £20,000 in April 2028. Individuals with self-employed income below £20,000 are currently exempt from the digital tax system but must adopt compatible accounting software for compliance.
A selection of third-party Making Tax Digital-compliant products can be found on the GOV.UK website. Key deadlines under Making Tax Digital are detailed for reference.