HMRC is planning to revamp the self-assessment tax system by replacing automatic fines with a new points-based penalty structure. Currently, taxpayers face an immediate £100 fine for late submission of their self-assessment tax returns. However, under the proposed system, individuals will incur a £200 charge once they accumulate a specific number of points.
The points system will be tied to the frequency of self-assessment submissions. Participants in the existing self-assessment scheme will accrue points for late tax return filings. If a taxpayer misses the deadline within a two-year period, they will receive additional points and a £200 penalty from HMRC.
The introduction of Making Tax Digital, a digital platform set to expand to a wider audience starting April 2026, will mandate sole traders and landlords earning over £50,000 annually to adopt the new tax reporting system. This initiative will require quarterly income reporting, with failure to meet deadlines resulting in points accumulation and a £200 fine after four missed submissions in two years.
According to The Telegraph, the points system has been piloted this month with 100 Making Tax Digital trial participants. Subsequently, the system will be implemented for all self-assessment filers. An HMRC spokesperson emphasized the aim to assist taxpayers in accurate tax compliance to avoid penalties. The new penalty structure intends to penalize only Making Tax Digital users persistently missing deadlines.
Making Tax Digital will gradually encompass individuals with lower income thresholds, with the threshold decreasing to £30,000 in April 2027 and further to £20,000 in April 2028. Currently, individuals with self-employed income below £20,000 are exempt from Making Tax Digital requirements, provided they utilize compatible accounting software.
To comply with Making Tax Digital regulations, individuals must utilize third-party software products that are compliant with the system, as listed on GOV.UK. The revised deadlines for Making Tax Digital compliance are as follows:
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