HMRC plans to implement a new points-based system to replace automatic fines in a significant overhaul of the self-assessment tax process. Currently, a £100 penalty is issued for late submission of a self-assessment tax return. Under the upcoming system, individuals will incur a £200 charge after accumulating a set number of points.
The points will be assigned based on the frequency of required self-assessments. Those under the existing self-assessment scheme will receive a point for late tax return submissions. If the deadline is missed again within a two-year span, another point will be added, along with a £200 fine from HMRC.
Scheduled for an expansion starting April 2026, Making Tax Digital is a new digital framework that will encompass more individuals. Sole traders and landlords earning over £50,000 annually will be mandated to utilize this updated tax reporting platform.
In the Making Tax Digital setup, quarterly earnings reporting is compulsory. Failure to meet the deadline four times within two years will result in four points and a £200 penalty. The Telegraph disclosed that the points system was recently introduced to 100 taxpayers in a Making Tax Digital trial and will be extended to other self-assessment filers.
An HMRC spokesperson emphasized the focus on assisting customers in accurate tax submissions to avoid fines altogether. The revamped penalty points system aims to penalize only Making Tax Digital participants persistently missing deadlines.
Making Tax Digital’s implementation is gradually expanding to lower income brackets, with the threshold set to decrease to £30,000 by April 2027 and further down to £20,000 by April 2028. Currently, individuals earning under £20,000 through self-employment are exempt from Making Tax Digital, requiring the use of compatible accounting software for compliance.
A range of third-party Making Tax Digital-compliant products is listed on the GOV.UK platform. Key deadlines under Making Tax Digital include the following:
– Annual turnover exceeding £85,000: April 1, 2022
– Annual turnover exceeding £10,000: April 1, 2023
– Annual turnover exceeding £1,000: April 1, 2024
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