HMRC plans to introduce a new points-based penalty system to replace automatic fines in a significant overhaul of the self-assessment tax process. Currently, a late submission of the self-assessment tax return incurs an immediate £100 fine. However, under the upcoming system, individuals will face a £200 charge once they accumulate a set number of points.
The points will be assigned based on the frequency of required self-assessment submissions. Participants in the existing self-assessment scheme 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 imposed.
Starting April 2026, Making Tax Digital will expand to encompass more individuals, including sole traders and landlords with an annual income exceeding £50,000. The digital system mandates reporting earnings quarterly. Failure to meet deadlines four times within two years will result in four points and a £200 penalty.
According to reports from The Telegraph, the points system was piloted this month for 100 taxpayers under the Making Tax Digital trial and will later be extended to other self-assessment filers. An HMRC spokesperson emphasized the aim to assist customers in correctly fulfilling tax obligations to avoid fines, noting that only persistent late filers under Making Tax Digital will face financial penalties.
The implementation of Making Tax Digital is gradually lowering income thresholds. From April 2027, the threshold will decrease to £30,000 and further to £20,000 from April 2028. Currently, individuals with self-employed income below £20,000 are exempt from Making Tax Digital compliance, requiring compatible accounting software for adherence.
A range of third-party Making Tax Digital-compliant tools can be found on GOV.UK. New deadlines for Making Tax Digital compliance are in effect, ensuring timely reporting and minimizing penalties for taxpayers.