HMRC is planning to introduce a new points-based system to replace automatic fines in 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. Under the upcoming changes, a £200 charge will be imposed after accumulating a specific number of points.
The points allocation will depend on the frequency of required self-assessment submissions. Participants in the existing system will receive a point for late tax return submissions. If the deadline is missed again within a two-year span, another point and a £200 fine from HMRC will be issued.
Scheduled for rollout from April 2026, Making Tax Digital will extend to more individuals, including sole traders and landlords with yearly earnings exceeding £50,000. This digital system mandates reporting earnings quarterly, with failure to meet deadlines resulting in point accumulation and fines.
Reports from The Telegraph indicate that the points system was recently piloted with 100 taxpayers under Making Tax Digital. The scheme is expected to extend to all self-assessment filers in the future. An HMRC spokesperson emphasized the aim to assist customers in accurate tax compliance to avoid penalties. The revised penalty points structure is designed to penalize only Making Tax Digital users consistently missing deadlines.
The implementation of Making Tax Digital will gradually include lower income brackets, with the threshold decreasing to £30,000 by April 2027 and further to £20,000 by April 2028. Currently, individuals with self-employment income below £20,000 are exempt from the system but will need compatible accounting software to comply once included.
A list of approved third-party Making Tax Digital-compliant software products is available on the GOV.UK website. New deadlines associated with Making Tax Digital have been outlined for reference.