HMRC plans to introduce a new points system to replace automatic fines in a significant overhaul of the self-assessment tax process. Currently, individuals face an instant £100 penalty for late submission of their tax return. Under the upcoming system, a £200 charge will be levied after accumulating a specific number of points.
The points will be assigned based on the frequency of self-assessment submissions. Those under the existing system will receive a point for late tax return submissions. If the deadline is missed again within two years, another point will be added along with a £200 fine from HMRC.
Scheduled for implementation from April 2026, Making Tax Digital will expand to encompass more individuals. Starting then, sole traders and landlords earning over £50,000 annually must adopt the new digital tax reporting platform.
In the Making Tax Digital framework, quarterly earnings reporting is mandatory. Failure to meet the deadline four times within two years will result in four points and a £200 penalty. According to The Telegraph, the points system has been pilot-tested on 100 taxpayers under Making Tax Digital, set for wider application among self-assessment filers.
An HMRC representative stated, “Our fairer penalty points system for late returns is aimed at supporting customers in avoiding fines by ensuring that only Making Tax Digital users consistently missing deadlines will face financial penalties.”
As Making Tax Digital gradually extends to lower income brackets, the threshold will decrease to £30,000 by April 2027 and further to £20,000 by April 2028. Individuals with self-employed income below £20,000 are currently exempt from Making Tax Digital but will need compatible accounting software for compliance.
A variety of third-party Making Tax Digital-compatible products are listed on GOV.UK. The revised deadlines under Making Tax Digital are as follows:
– Quarterly earnings reports
– Annual summary submission
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