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 returns. However, under the upcoming system, a £200 charge will be imposed once a certain number of points are accrued.
The new system will track how frequently individuals must submit their self-assessment forms. Those currently using the self-assessment scheme will receive a point for late tax return submissions. If they miss the deadline again within a two-year period, an additional point and a £200 fine from HMRC will be levied.
From April 2026, Making Tax Digital, a digital platform, will be expanded to encompass more taxpayers. Sole traders and landlords with annual incomes exceeding £50,000 will be mandated to adopt the new tax reporting mechanism.
Under Making Tax Digital, individuals will be required to report their earnings quarterly. Failure to meet deadlines four times within two years will result in accumulating four points and incurring a £200 penalty.
According to reports from The Telegraph, the points system was recently piloted with 100 taxpayers participating in the Making Tax Digital trial. It is expected to be implemented for all self-assessment filers in the future.
An HMRC spokesperson emphasized the aim of assisting customers in accurately managing their taxes to avoid penalties. The new penalty points system is designed to penalize only Making Tax Digital users who consistently miss submission deadlines.
Making Tax Digital will gradually include taxpayers with lower income thresholds. The threshold will decrease to £30,000 by April 2027, and further to £20,000 by April 2028. Those with self-employed incomes below £20,000 are currently exempt from Making Tax Digital but will need compatible accounting software for compliance.
A range of third-party Making Tax Digital-compliant software products can be found on GOV.UK. The updated deadlines for Making Tax Digital compliance are available on the platform.