HMRC plans to implement a new points-based system to replace automatic fines in a significant overhaul of the self-assessment tax process. Currently, a £100 penalty is imposed for late submission of self-assessment tax returns; however, the revised system will levy a £200 charge after accumulating 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 late tax return submission. If the deadline is missed again within a two-year span, another point and a £200 fine from HMRC will be issued.
The introduction of Making Tax Digital, a digital platform expanding to more users starting April 2026, will mandate sole traders and landlords with annual incomes exceeding £50,000 to adopt the new tax reporting system.
Under Making Tax Digital, quarterly income reporting will be necessary. Failure to meet deadlines four times within two years will result in four points and a £200 penalty. According to The Telegraph, the points system was recently initiated for 100 test participants of the Making Tax Digital trial, with plans for wider implementation among self-assessment filers.
An HMRC spokesperson emphasized their focus on assisting taxpayers in accurate tax compliance to avoid penalties. The new penalty points system aims to penalize only Making Tax Digital users who consistently miss submission deadlines.
The gradual extension of Making Tax Digital will include lower income thresholds, reducing to £30,000 from April 2027 and further to £20,000 from April 2028. Individuals with self-employed earnings below £20,000 are currently exempt from Making Tax Digital but will require compatible accounting software for compliance.
A list of third-party Making Tax Digital-compliant software products is available on the GOV.UK website. Updated deadlines for Making Tax Digital compliance are detailed on the platform.