HMRC is planning to replace automatic fines with a new points-based system in a significant overhaul of the self-assessment tax regime. Currently, a £100 penalty is imposed for late submission of self-assessment tax returns, but under the upcoming system, individuals will incur a £200 charge upon accumulating a specific number of points.
The allocation of points will be linked to the frequency of self-assessment submissions. Individuals under the existing self-assessment framework will receive a point for late tax return filing. If the deadline is missed again within a two-year span, an additional point will be assigned along with a £200 fine from HMRC.
The introduction of Making Tax Digital, a digital platform expanding to more users starting April 2026, will mandate sole traders and landlords with incomes exceeding £50,000 to utilize the new tax reporting system. This system requires reporting earnings quarterly, with failure to meet deadlines resulting in points and fines.
The Telegraph has reported the recent implementation of the points system for 100 trial participants of Making Tax Digital, with plans to extend it to all self-assessment filers. An HMRC spokesperson emphasized the aim to assist customers in accurate tax compliance to avoid penalties, highlighting that only persistent late filers under Making Tax Digital will face financial sanctions.
The gradual rollout of Making Tax Digital will encompass lower income brackets, with the threshold decreasing to £30,000 by April 2027 and further down to £20,000 by April 2028. Currently, individuals earning below £20,000 from self-employment are exempt from Making Tax Digital requirements, provided they use compatible accounting software.
A range of third-party Making Tax Digital-compliant software products are available on GOV.UK, facilitating adherence to the system’s specifications. Revised deadlines under Making Tax Digital framework have been outlined for compliance.