HM Revenue and Customs (HMRC) is overhauling its approach to late self-assessment tax returns, replacing automatic fines with a new penalty points system. This change is set to begin this month with a trial involving 100 taxpayers participating in the Making Tax Digital (MTD) program, before expanding to all individuals who file tax returns.
Under the current system, missing a self-assessment deadline results in an immediate £100 fine. The new system will instead issue penalty points for late submissions. Only those who accumulate a certain number of points will face financial penalties, starting at £200.
Liam Coulter, tax director at Wilson Nesbitt, described the move as a “fairer alternative” that focuses on penalizing persistent late filers rather than individuals making occasional mistakes. He noted that the introduction of Making Tax Digital for many self-employed people and landlords in April 2026 will bring increased administrative demands, technological challenges, and potential stress.
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In response, HMRC has committed to offering first-year penalty relief for late submissions, allowing taxpayers a grace period to adapt without facing immediate fines. The rollout of MTD for Income Tax will depend on individual qualifying income thresholds, ensuring that taxpayers are only required to comply based on their circumstances.
An HMRC spokesperson emphasized the agency’s priority in helping customers get their tax affairs right to avoid penalties altogether. They added that the new points system is designed to be fairer by targeting only those customers who repeatedly miss deadlines under the Making Tax Digital framework.