HMRC to Replace £100 Late-Filing Fine With New Penalty Points System
HM Revenue and Customs (HMRC) is set to overhaul how it fines taxpayers who miss key tax deadlines, replacing the current automatic £100 penalty with a new points-based system. The change will initially be rolled out as part of a Making Tax Digital (MTD) trial before being expanded nationwide.
Under the existing rules, self-employed workers are automatically fined £100 if they fail to file their tax return on time, regardless of the reason or frequency of lateness. HMRC says the new system is designed to be fairer and focus on repeat offenders rather than those who make occasional mistakes.
How the New Penalty Points System Will Work
Instead of an immediate fine, taxpayers who miss a filing deadline will receive a penalty point. The system will track missed submissions over time, rather than punishing one-off errors.
For those on the new MTD system, earnings will be reported quarterly instead of once a year. If a taxpayer misses four submission deadlines within a two-year period, they will receive a £200 fine alongside four penalty points.
Quarterly Reporting Will Apply to Millions
The changes are part of HMRC’s wider Making Tax Digital programme, which aims to modernise the tax system and reduce errors. Millions of taxpayers will eventually be required to submit updates to HMRC four times a year rather than annually.
From April, sole traders and landlords earning more than £50,000 a year will be required to use the MTD system. By 2028, the scheme will expand to include those earning at least £20,000, bringing up to one million additional freelancers and landlords into quarterly reporting.
Repeat Offenders Face Higher Costs
While the new system removes the automatic £100 fine, repeat offenders could end up paying more overall. Missing multiple deadlines will trigger larger one-off penalties, meaning consistent late filers may face higher costs than under the old rules.
Tax specialists have warned that the shift to quarterly reporting increases the risk of missed deadlines, particularly for small business owners and landlords unfamiliar with digital tax systems.
HMRC Says System Is ‘Fairer’
Liam Coulter, tax director at Wilson Nesbitt, said the change appears to be a more balanced approach. He said the points-based system focuses on persistent non-compliance rather than punishing honest mistakes.
An HMRC spokesperson said the department was committed to helping taxpayers get their tax right and avoid fines altogether. They added that financial penalties would only apply to Making Tax Digital customers who repeatedly fail to meet their obligations.
What Taxpayers Should Do Now
Self-employed workers, landlords and freelancers are being urged to familiarise themselves with Making Tax Digital requirements ahead of the wider rollout. Keeping accurate records, using compatible software and setting reminders for submission dates will be crucial to avoiding penalty points.
HMRC has stressed that the new system is intended to encourage better compliance, but taxpayers who fail to adapt could still find themselves facing significant fines over time.
