UK households have been alerted to a significant change in HMRC’s penalty system. The Labour Party government’s tax division is set to replace fines for missed self-assessment deadlines with a new penalty points system.
This month, the points system will be trialled with 100 taxpayers participating in a Making Tax Digital pilot, before being extended to all those who file a tax return, according to HMRC.
Instead of an immediate £100 fine for a late return, taxpayers will now receive a penalty point. Once a certain number of points are accumulated, a charge of £200 will be imposed.
Liam Coulter, tax director at Wilson Nesbitt, said: “HMRC’s change to a points-based system appears to be a fairer alternative to the automatic fines administered previously, with the new system designed to penalise persistent offenders rather than those who have made honest mistakes.”
Mr Coulter said: “Making Tax Digital comes into force for many self-employed people and landlords from April 6 2026, bringing in more administrative burden, cost and stress.”, reports Birmingham Live.
He warned: “This will be a steep learning curve with taxpayers expected to get to grips with new technology, quarterly reporting and the anxiety of getting things wrong.”
However, he also highlighted some relief, saying: “HMRC has confirmed that first-year penalty relief will be available for late submissions, providing a welcome grace period and giving taxpayers time to learn the ropes without the immediate pressure of financial penalties.”
When you need to start using Making Tax Digital for Income Tax depends on your qualifying income within a tax year.
If your qualifying income is over:
- £50,000 for the 2024 to 2025 tax year, you will need to use it from 6 April 2026
- £30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027
- £20,000 for the 2026 to 2027 tax year, the government has set out plans to introduce legislation to lower the qualifying income threshold
An HMRC spokesman said: “We’re committed to helping customers get their tax right to avoid fines altogether.
“Our fairer penalty points system for late returns will mean that only Making Tax Digital customers who persistently miss deadlines will incur a financial penalty.”