HMRC is planning 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. Under the updated system, individuals will incur a £200 charge after accumulating a specific number of points, depending on the frequency of their self-assessment submissions.
The points system will assign a point to individuals who fail to submit their tax returns on time under the existing self-assessment framework. If the deadline is missed again within a two-year period, another point will be added, along with a £200 fine from HMRC. The introduction of Making Tax Digital aims to transition more people to a digital tax reporting system starting in April 2026, requiring sole traders and landlords with annual incomes exceeding £50,000 to adopt the new system.
In the Making Tax Digital scheme, earnings must be reported quarterly. Failure to meet the deadline four times within two years will result in four points and a £200 fine. Recent reports indicate that a points system has been piloted this month for 100 taxpayers participating in a Making Tax Digital trial, with plans to extend it to all self-assessment filers.
An HMRC spokesperson emphasized the focus on assisting customers in accurately managing their taxes to avoid penalties. The revised penalty points system is designed to penalize only Making Tax Digital users who consistently miss deadlines. The implementation of Making Tax Digital will gradually encompass lower income thresholds, reducing to £30,000 in April 2027 and further to £20,000 in April 2028.
Individuals with self-employed incomes below £20,000 are currently exempt from Making Tax Digital requirements but will need compatible accounting software to comply. A range of third-party Making Tax Digital-compliant products is available on the GOV.UK website. Updated deadlines under Making Tax Digital regulations are provided for reference.