HMRC plans to introduce 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 tax returns, but under the upcoming system, individuals will incur a £200 charge after accumulating a specified number of points.
The points will be assigned based on the frequency of self-assessment submissions. Those under the existing system will receive a point for late tax return filings. If they miss the deadline again within a two-year span, another point will be added, along with a £200 penalty from HMRC.
Scheduled to expand to a wider audience starting April 2026, Making Tax Digital is a new digital platform. By this time, self-employed individuals and landlords with an annual income exceeding £50,000 will be mandated to utilize the new tax reporting mechanism.
Under the Making Tax Digital scheme, quarterly earnings reporting is compulsory. Missing four deadlines within two years will result in accumulating four points and a £200 fine. According to The Telegraph, the points system has been implemented for 100 trial participants of Making Tax Digital this month, with plans for broader implementation among self-assessment filers.
An HMRC spokesperson emphasized the focus on assisting customers in accurate tax compliance to avoid penalties. The revised penalty points approach ensures that only Making Tax Digital users persistently missing deadlines will face financial repercussions.
The gradual implementation of Making Tax Digital will extend to lower income thresholds, with the threshold decreasing to £30,000 by April 2027 and further to £20,000 by April 2028. Currently, individuals with self-employed earnings below £20,000 are exempt from Making Tax Digital requirements, necessitating the use of compatible accounting software for compliance.
A variety of third-party Making Tax Digital-compliant products are listed on the GOV.UK website. Key deadlines under Making Tax Digital include:
– April 2027: Threshold lowered to £30,000
– April 2028: Threshold further reduced to £20,000
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