From 2026, HMRC is replacing the longstanding automatic fines for late tax filings with a penalty points system as part of its Making Tax Digital (MTD) reforms. The aim is to make late-filing sanctions more proportionate and fairer by distinguishing between occasional ‘slip-ups’ and persistent non-compliance.
What’s changing
Under the current regime, missing the 31 January Self Assessment deadline triggers an automatic £100 fine, which can escalate quickly with daily and longer-term penalties.
Under the new system:
- Each missed deadline earns a penalty point
- A £200 fine is charged for each late submission once a set points threshold is reached
- Points accumulate against each filing obligation and can expire after 24 months or reset after a period of good compliance
This is designed to penalise repeated late filing rather than isolated errors and give taxpayers a clearer path to correct behaviour.
Points thresholds
The number of points required before a fine is charged depends on how often you file:
- Annual returns: penalty at 2 points
- Quarterly updates (MTD): penalty at 4 points
- Monthly returns: penalty at 5 points
For example, missing two annual obligations within two years would trigger a £200 penalty under the new regime.
Rollout timeline
- Pilot phase (early 2026): HMRC is already trialling the points system with a group of taxpayers as part of MTD voluntary testing.
- First rollout from 6 April 2026: Applies initially to sole traders and landlords with income over £50,000 who must join MTD for Income Tax.
- Full rollout from 6 April 2027: The system extends to all self-assessment taxpayers
Importantly, HMRC will provide a soft landing in the first year: penalty points will not be charged for late quarterly updates for the initial year of MTD for Income Tax implementation, giving taxpayers time to adjust.
What this means for taxpayers
If you are self-employed, a landlord, or otherwise subject to Self-Assessment:
- One occasional late submission won’t necessarily hit you with immediate fines
- Repeated late filings still lead to penalties – and a £200 fine will be incurred for each late submission once the points thresholds are reached
- Good digital record-keeping and calendar discipline will be even more important
Filing regularly using MTD-compatible software and meeting deadlines remains the most effective way to avoid penalty points altogether.
Stay prepared
From 2026, late filing penalties will be based on accumulated points rather than automatic fines. While this makes the system fairer for occasional slip-ups, repeated missed deadlines can still trigger financial penalties.
Now is the time to review your filing processes, ensure your records are MTD-compliant, and put a plan in place to avoid points building up.
Our team can help. Whether it’s assessing your current compliance, setting up effective digital record-keeping, or providing ongoing support, we can guide you through the changes and help you stay penalty-free. Get in touch to arrange a 1-1 discussion by emailing enquiries@pmm.co.uk.
