HMRC is planning to introduce a revised penalty system, replacing automatic fines with a points-based approach in an overhaul of the self-assessment tax process.

Currently, late submission of a self-assessment tax return incurs an instant £100 penalty. Under the upcoming system, individuals will accrue points leading to a £200 charge once a specific threshold is reached.

The point system will be linked to the frequency of self-assessment submissions. Those under the existing regime will receive a point for late filing, with a subsequent violation within two years resulting in another point and a £200 fine from HMRC.

Scheduled for wider implementation starting April 2026, Making Tax Digital will mandate sole traders and landlords earning over £50,000 annually to adopt the new digital tax reporting platform.

In the Making Tax Digital framework, income reporting will occur quarterly. Missing four deadlines within two years will lead to four points and a £200 penalty.

The Telegraph has reported the initial application of the points system to 100 taxpayers participating in a Making Tax Digital trial, with plans to extend it to other self-assessment filers.

An HMRC spokesperson emphasized the goal of assisting taxpayers in accurate tax compliance to avoid penalties. The new penalty points system aims to penalize only Making Tax Digital users consistently missing deadlines.

As Making Tax Digital progresses, lower income thresholds will be included, with the threshold decreasing to £30,000 by April 2027 and further to £20,000 by April 2028.

Currently, individuals with self-employment income below £20,000 are exempt from Making Tax Digital but will require compatible accounting software for compliance.

A range of third-party Making Tax Digital-compliant software options is available on the GOV.UK website. Key deadlines under the Making Tax Digital scheme are:

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