HMRC plans 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 system, a £200 charge will be imposed after accumulating a specific number of points.
The allocation of points will be tied to the frequency of self-assessment submissions. Those 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, an additional point and a £200 fine from HMRC will be incurred.
The implementation 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 utilize the new tax reporting mechanism. Individuals will be required to report earnings quarterly under this system, with failure to meet deadlines resulting in accumulating points and a £200 fine after four instances over two years.
According to reports from The Telegraph, the points system has been initiated for 100 participants in a Making Tax Digital trial and will extend to other self-assessment filers. An HMRC spokesperson emphasized the focus on assisting customers in accurate tax compliance to mitigate fines, with penalties only applicable to Making Tax Digital users persistently missing deadlines.
The gradual expansion of Making Tax Digital will also impact lower income thresholds, decreasing to £30,000 by April 2027 and further to £20,000 by April 2028. Currently, individuals with self-employed incomes below £20,000 are exempt from Making Tax Digital requirements but must adopt compatible accounting software for compliance. A selection of third-party Making Tax Digital-compliant products can be found on the GOV.UK website.
New deadlines for Making Tax Digital compliance have been established, reflecting the evolving tax reporting landscape.