HMRC to introduce new ‘penalty points’ system in 2026
HMRC is introducing a new “penalty points” system this month that could see forgetful taxpayers fined up to £200.
The new system, proposed by the tax office in 2024, is planned to come into force from this year, starting with a trial by approximately 100 taxpayers as part of the Tax Digitalization plan.
Under the current rules, those who miss the self-assessment deadline on January 31 will automatically face a £100 fine. This could increase by £900 (£10 a day) after three months and by a further £300 after six months.
The new system will see many sole traders given a quarterly period to file updates, after which a year-end “final return” will be issued to replace the current self-assessment tax return.
Each quarterly late submission will earn one penalty point rather than an automatic fine, and four points (or four missed deadlines per quarter) will result in a £200 fine.
Meanwhile, each annual late submission will also result in a penalty point, but the threshold is lower, with two points (or missing the two-year deadline) resulting in a £200 fine.
Although this system will initially only affect a small number of people, it will be fully implemented from April 2026 for sole traders and landlords with annual self-employed and property income over £50,000. This threshold will be reduced each year, to £30,000 in 2027 and to £20,000 in 2028.
In order to give investors time to adapt, the three-month penalty point system will not be applied in the first year of the system, which will start in April.
In an article about the changes, HMRC explained: “The new penalty regime is simpler and fairer than the previous system. The new system will penalize those who persistently fail to comply by missing application and payment deadlines, while being more lenient towards those who occasionally fail to meet obligations.”
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An HMRC spokesman said Sky News: “We’re committed to helping our customers get their taxes right to avoid penalties altogether. Our fairer penalty points system for late returns will mean that only Make Tax Digital customers who persistently miss deadlines will face financial penalties.”
HMRC revealed last week that 3.3 million people have yet to complete their self-assessment tax return, with just a week left until 31 January.
