HMRC is planning to replace its current automatic fine system with a new points-based approach in a significant overhaul of the self-assessment tax process. Instead of an immediate £100 penalty for late submission, taxpayers will now incur a £200 charge after accruing a set number of points.
The points will be assigned based on the frequency of required self-assessment submissions. Individuals under the existing self-assessment scheme will receive a point for each late tax return submission. Repeat late filings within a two-year period will result in additional points and a £200 fine issued by HMRC.
Beginning April 2026, more individuals will be mandated to utilize the Making Tax Digital system, including sole traders and landlords earning over £50,000 annually. This digital platform requires quarterly income reporting, with failure to meet deadlines resulting in point accumulation and fines.
The Telegraph disclosed that the points system was piloted this month with 100 taxpayers under Making Tax Digital. It is slated for broader implementation among self-assessment filers soon. An HMRC spokesperson emphasized the aim to assist clients in accurate tax declarations to avoid penalties, noting that only persistent late filers under Making Tax Digital will face financial repercussions.
The Making Tax Digital rollout will gradually encompass lower income thresholds, reducing to £30,000 in April 2027 and further to £20,000 in April 2028. Individuals earning below £20,000 through self-employment are currently exempt from the digital system but will need compatible accounting software for compliance.
A range of third-party Making Tax Digital-compliant software products is available on GOV.UK. New deadlines for Making Tax Digital compliance have been specified.