HMRC plans to revamp the self-assessment tax system by replacing automatic fines with a new points-based penalty structure. Instead of an immediate £100 fine for late submission under the current system, individuals will incur a £200 charge upon accumulating a specific number of points. The points will be assigned based on the frequency of self-assessment submissions, with late filers receiving penalty points.
Starting April 2026, the Making Tax Digital initiative will expand to include more individuals. Sole traders and landlords earning over £50,000 annually will be mandated to utilize the new digital tax reporting system. This system requires quarterly earnings reporting, and failure to meet deadlines can result in accumulating points and a £200 fine after four missed submissions within a two-year period.
A recent trial involving 100 taxpayers under Making Tax Digital introduced the points system, which will be gradually implemented for all self-assessment filers. An HMRC spokesperson emphasized the objective of assisting customers in accurate tax filing to avoid penalties, noting that only persistent late filers under Making Tax Digital will face financial consequences.
The Making Tax Digital thresholds are expected to decrease over time, with the income threshold set to lower to £30,000 in April 2027 and further to £20,000 in April 2028. Individuals with self-employed income below £20,000 are currently exempt from the Making Tax Digital requirements but must use compatible accounting software when necessary.
For users seeking Making Tax Digital-compliant software, a list of third-party products is available on the GOV.UK website. The new deadlines under Making Tax Digital implementation are as follows:
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