HMRC plans to introduce a new points-based penalty system, replacing automatic fines, in a significant overhaul of the self-assessment taxation process. Currently, individuals face an immediate £100 penalty for late submission of their self-assessment tax return. However, under the revised system, a £200 charge will be imposed after accumulating a specific number of points.
The points system will be linked to the frequency of self-assessment submissions. Taxpayers on the existing system will receive a point for late tax return filings. Subsequent late submissions within a two-year period will result in additional points and a £200 fine from HMRC.
Scheduled for expansion starting April 2026, Making Tax Digital is a new digital platform that mandates sole traders and landlords with annual incomes exceeding £50,000 to adopt the new tax reporting mechanism. The system requires quarterly income reporting, with failure to meet deadlines leading to point accrual and fines.
The Telegraph disclosed that the points system was recently introduced to 100 trial participants of Making Tax Digital. The initiative is expected to extend to other self-assessment filers in the future. An HMRC spokesperson emphasized the focus on assisting taxpayers in accurate tax reporting to avoid penalties, highlighting that only persistent late filers under Making Tax Digital will face financial repercussions.
Making Tax Digital’s implementation is progressively targeting lower income thresholds, with the threshold set to decrease to £30,000 by April 2027 and further to £20,000 by April 2028. Individuals with self-employed incomes below £20,000 are currently exempt from Making Tax Digital requirements, needing compatible accounting software for compliance.
A range of third-party Making Tax Digital-compliant software products can be found on the GOV.UK website. Updated deadlines for Making Tax Digital compliance are provided on the platform, ensuring taxpayers stay informed about the necessary reporting timelines.