HMRC is rolling out a new “penalty points” system this month that could land forgetful taxpayers with a £200 fine.
The new system. proposed by the tax authority in 2024, will first be tested on around 100 taxpayers, as part of the Making Tax Digital scheme.
Under the current rules, those who miss the 31 January self-assessment submission deadline get an automatic £100 fine. This can increase by £900 after three months (£10 a day), then another £300 after six months.
The new system will see many sole traders given quarterly deadlines to file updates, and then an end-of-year “final declaration” which will replace the current self-assessment tax return.
Each late quarterly submission will earn one penalty point instead of an automatic fine, with four points (or four missed quarterly deadlines) resulting in a £200 fine.
Meanwhile, each late annual submission will also result in one penalty point, but the threshold is lower, at two points (or two missed annual deadlines), which will also result in a £200 fine.
While this system will affect only a small number of people to begin with, it will begin to be rolled out fully from April for sole traders and landlords with annual self-employment and property income over £50,000. This threshold will be lowered each year, to £30,000 in 2027, and £20,000 in 2028.
The quarterly penalty points system will not apply in the first year of the scheme to give traders time to adapt.
HMRC explained in a paper on the changes: “The new penalty regime is simpler and fairer than the previous system. The new system will penalise those who persistently do not comply by missing filing and payment deadlines, while being more lenient on those who occasionally fail to meet obligations.”
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An HMRC spokesperson told Sky News: “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.”
HMRC revealed last week that 3.3 million people still had yet to file their self-assessment tax return, with just a week to go until the 31 January deadline.