HMRC plans to introduce a new points system in place of automatic fines, marking a significant shift in the self-assessment tax process. Currently, a £100 penalty is immediately imposed for late submission of self-assessment tax returns. However, the upcoming system will levy a £200 charge after accumulating a specific number of points.
The points will be assigned based on the frequency of required self-assessment submissions. Individuals under the existing self-assessment framework will receive a point for late tax return submissions. If they miss the deadline again within a two-year span, they will incur an additional point and a £200 penalty from HMRC.
Scheduled for wider implementation starting April 2026, Making Tax Digital is a new digital platform aimed at sole traders and landlords with annual incomes exceeding £50,000. This initiative mandates the use of the new tax reporting mechanism.
Under the Making Tax Digital protocol, income reporting is required quarterly. Failure to meet deadlines four times within two years will result in four points and a £200 fine. The Telegraph disclosed that the points system was recently introduced for 100 participants in a Making Tax Digital trial and will extend to other self-assessment filers.
An HMRC spokesperson emphasized the objective of assisting clients in accurate tax declaration to avoid penalties entirely. The revised penalty points scheme for late submissions ensures that only Making Tax Digital users persistently missing deadlines will face financial consequences.
The gradual implementation of Making Tax Digital will extend to lower income thresholds, decreasing to £30,000 from April 2027 and then to £20,000 from April 2028. Currently, individuals earning less than £20,000 from self-employment are exempt from Making Tax Digital compliance, necessitating compatible accounting software for adherence.
A selection of third-party Making Tax Digital-compliant software products is available on GOV.UK. Noteworthy deadlines under the Making Tax Digital framework are as follows: [List of deadlines here].
