HMRC Introduces New Penalty Points System for Late Tax Filings
HM Revenue and Customs (HMRC) is set to implement a new penalty points system this month, marking a significant shift in how late tax returns are handled. The initiative will begin with a trial involving 100 taxpayers as part of the broader Making Tax Digital scheme, before being extended to all individuals who file tax returns.
How the New System Works
Under the new regime, taxpayers who miss self-assessment deadlines will no longer face an automatic £100 fine. Instead, they will accrue penalty points for each missed deadline. Once a specific threshold of points is reached, a financial penalty of £200 will be imposed.
The threshold is tailored to the taxpayer's filing frequency, ensuring a more personalised approach:
- For annual filers, missing two deadlines within a two-year period will trigger the £200 fine.
- For quarterly filers, four missed deadlines over two years will result in the same penalty.
HMRC's Rationale for the Change
In a previously published policy paper, HMRC stated that the new system is designed to be simpler and fairer than the previous one. It aims to penalise those who persistently fail to comply with filing and payment deadlines, while showing leniency towards those who occasionally miss obligations.
An HMRC spokesperson emphasised the commitment to helping customers avoid fines altogether, noting that the penalty points system will only affect Making Tax Digital customers who consistently miss deadlines.
This move is part of HMRC's ongoing efforts to modernise tax administration and encourage timely compliance, with the Making Tax Digital scheme at its core. The trial phase will allow for adjustments before a full rollout, potentially impacting millions of taxpayers across the UK.
