HMRC plans to introduce a new points-based system as a replacement for automatic fines in a significant revamp of the self-assessment tax process. Currently, individuals face an immediate £100 penalty for late submission of their self-assessment tax return. However, under the upcoming system, a £200 charge will be levied upon accumulating a set number of points.
The points will be assigned based on the frequency of self-assessment submissions required. Those within the existing self-assessment framework will receive a point for late submission of their tax return. Subsequently, if they miss the deadline again within a two-year span, they will receive another point along with a £200 fine from HMRC.
Scheduled for implementation from April 2026, Making Tax Digital will extend to more individuals, including sole traders and landlords with an annual income exceeding £50,000. This digital system mandates reporting earnings quarterly, and failure to meet deadlines for four reporting periods within two years will result in four points and a £200 penalty.
As per reports from The Telegraph, the points system was recently introduced to 100 taxpayers participating in a Making Tax Digital trial and is poised for wider adoption among self-assessment filers. An HMRC spokesperson emphasized the aim of assisting taxpayers in accurately fulfilling their tax obligations to avoid penalties. The revised penalty structure ensures that only Making Tax Digital users persistently failing to meet deadlines will face financial consequences.
The gradual rollout 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 income below £20,000 are currently exempt from Making Tax Digital requirements but will need compatible accounting software for compliance.
A variety of third-party Making Tax Digital-compliant software options are available on the GOV.UK website. Key deadlines under the new system include reporting earnings quarterly. Readers can designate Daily Mirror as a ‘Preferred Source’ on Google News for streamlined access to preferred news content.
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