HMRC to Launch New Penalty Points System in 2026
Millions of taxpayers across the United Kingdom are set to be impacted by significant changes to HM Revenue and Customs' penalty regime in the coming years. The new system, which replaces automatic fines with a points-based approach, is designed to be fairer and more targeted towards persistent late filers.
How the New System Will Work
Under the current rules, taxpayers who miss the 31 January self-assessment submission deadline face an immediate £100 fine. This penalty can escalate dramatically, increasing by £900 after three months (at a rate of £10 per day) and by another £300 after six months.
The new regime, which was first proposed by the tax authority in 2024, will introduce a penalty points system that functions differently:
- For quarterly submissions (required under Making Tax Digital), each late filing will earn one penalty point
- Accumulating four points (equivalent to four missed quarterly deadlines) will trigger a £200 fine
- For annual submissions, each late filing will also result in one penalty point
- The threshold for annual submissions is lower, with just two points (two missed annual deadlines) resulting in a £200 fine
Phased Implementation Timeline
The rollout will begin cautiously, starting with a trial involving approximately 100 taxpayers this year as part of the broader Making Tax Digital initiative. The quarterly penalty points system will not apply during the scheme's first year, beginning in April, to allow traders adequate time to adapt to the new requirements.
Full implementation will commence from April 2026, initially affecting sole traders and landlords with annual self-employment and property income exceeding £50,000. The threshold will be progressively lowered in subsequent years:
- £30,000 in 2027
- £20,000 in 2028
HMRC's Rationale and Response
In official documentation explaining the changes, HMRC stated: "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."
An HMRC spokesperson elaborated to 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."
Current Filing Statistics and Context
The announcement comes at a critical time, with HMRC revealing last week that 3.3 million people had yet to file their self-assessment tax return with just one week remaining until the 31 January deadline. This highlights the scale of the challenge facing both taxpayers and the revenue service.
The new system represents a fundamental shift in how late submissions are handled, moving away from automatic financial penalties toward a more nuanced approach that distinguishes between occasional and habitual late filers. For many sole traders, this will mean adapting to quarterly filing requirements and understanding how the points system functions to avoid unexpected fines.
