Late filing of Self Assessment Tax Returns has always attracted a fine, but HMRC is set to reform the Self Assessment penalty system from 2026. The current standard £100 fine will be changed to a points-based system that focuses on persistent non-compliance, while taxpayers who make occasional mistakes are spared.

HMRC has said the change in the Self Assessment penalty system is designed to curb abuse of the deadlines, with the planned penalty reforms based on the length of time any tax due is outstanding.

They predict it will only affect 5% of taxpayers.

According to an HMRC spokesperson ‘We are reforming penalties so taxpayers who occasionally miss the filing deadline will not face financial penalties. Instead, we will focus on those who persistently miss filing and payment deadlines.’

The new Self Assessment penalty regime will penalise the minority who are regularly late, while being more lenient on those who occasionally miss deadlines.

Late payment penalty example: A payment made within 30 days of the due date will have a lower penalty charge than one made after 30 days late. The idea is that this encourages those that can pay to do so, while taking appropriate action against persistent offenders.

Late filing penalty example: Taxpayers who miss a Self Assessment filing deadline will initially be given a point, with a financial penalty being charged only once a set number of points is reached.

This approach is said to recognise that taxpayers who occasionally miss deadlines should be ‘encouraged to comply with filing obligations, rather than immediately being charged a penalty’.

Do points based penalties apply elsewhere?

Yes, points based penalties already apply for VAT. The imposition of a points related penalty scheme to Self Assessment in 2026 dovetails with the revised date for MTD for Income Tax, which was delayed until 2026 in December 2022.

The rule change is expected to raise £155m in penalties according to calculations published as part of the Budget in March 2023. Whilst the headline is that HMRC are seeking just to penalise the 5% of taxpayers who are the worst offenders, this could become a good income line for them!

As ever, we work to get clients’ Tax Returns submitted as early in the tax year as possible, so penalties should never become an issue, as any tax liability should never be a shock. We’d strongly recommend this to any non-clients too, as it really can help you sleep better at night, particularly as the deadline draws closer.