HM Revenue and Customs is currently in the process of rolling out a significant new system for handling late self-assessment tax returns, which represents a substantial shift from the previous penalty structure. The new approach, which began its initial implementation in January, is currently being trialled with approximately one hundred taxpayers before its anticipated extension to all individuals who file tax returns.
A Shift from Immediate Fines to Accumulated Points
Under the established rules of the Making Tax Digital scheme, missing a self-assessment deadline would typically trigger an immediate £100 fine. However, the newly introduced system replaces this with a penalty points framework. Each missed deadline will now result in the accrual of a single penalty point rather than an instant financial charge.
Thresholds for Financial Penalties
The terms of this reformed system specify that once a taxpayer accumulates a certain number of points, they will then become liable for a £200 fine. The threshold varies depending on the frequency of an individual's tax submissions.
For those who file their tax returns on an annual basis, receiving two penalty points within a two-year period will trigger the £200 financial penalty. Conversely, for taxpayers who are required to submit returns on a quarterly basis, the threshold is set at four penalty points accrued over the same two-year timeframe before the fine is applied.
HMRC's Rationale for the Change
In an official policy document, HMRC has stated that the new penalty regime is designed to be simpler and fairer than the previous system. The revenue body explained that the updated framework will more effectively penalise those who persistently fail to comply with filing and payment deadlines, while adopting a more lenient approach towards individuals who only occasionally miss their obligations.
An HMRC spokesperson elaborated on this position, stating: "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."
Additional Late Payment Charges
In addition to the points-based system for late filings, taxpayers who fail to meet their payment deadlines will also face revised charges for late tax payments. Reports indicate that the new late payment penalty will consist of two separate charges.
The initial charge will become due thirty days following the payment deadline and will be calculated as a fixed percentage of any amount that remains unpaid. From the thirty-first day onward, a second charge will begin to accrue on a daily basis, calculated according to the outstanding sum owed to the tax authority.
Support and Guidance for Taxpayers
HMRC has confirmed plans to mitigate the impact of the new Making Tax Digital system through an extensive publicity campaign aimed at raising awareness among taxpayers. The revenue body is also committed to providing comprehensive guidance and support to those who are considering registration or who may need assistance navigating the updated requirements.
This transitional approach reflects HMRC's stated intention to balance enforcement with taxpayer support, ensuring that individuals have adequate opportunity to understand and comply with their obligations under the evolving digital tax framework.
