What's happened
HM Revenue and Customs (HMRC) reports over 11.4 million self-assessment returns filed by the January 31 deadline, with about one million taxpayers missing it. A new penalty system trial begins, replacing automatic fines with penalty points for late filings, affecting sole traders from April 2026.
What's behind the headline?
The shift to a penalty points system reflects HMRC's effort to encourage compliance without penalizing occasional delays excessively. By linking penalties to repeated failures, the new scheme aims to differentiate between genuine mistakes and persistent non-compliance. This approach could reduce unnecessary fines for honest taxpayers while increasing pressure on habitual defaulters. The phased rollout, starting with high-income earners, suggests a targeted strategy to improve overall tax compliance. However, the success of this system depends on clear communication and taxpayer understanding, as well as HMRC's ability to enforce the new rules effectively. The move aligns with broader trends toward digital tax administration, emphasizing fairness and simplicity.
What the papers say
The Independent reports that over 11.4 million self-assessment returns were filed by the deadline, with about one million missing, potentially incurring automatic fines of up to £100 million. The article highlights HMRC's advice on late filing penalties and the importance of prompt action to avoid further charges. Sky News and The Independent detail the upcoming trial of the new penalty points system, which replaces automatic fines with a points-based approach for quarterly and annual filings. The scheme, starting with a pilot of 100 taxpayers, will be fully implemented from April 2026 for those with income over £50,000, with thresholds decreasing annually. HMRC claims the new system is fairer and targets persistent non-compliance, aiming to reduce penalties for occasional delays while penalizing habitual offenders. The articles contrast the current automatic fine regime with the proposed points system, emphasizing the potential for a more nuanced and equitable approach to tax compliance.
How we got here
HMRC's current penalty regime imposes automatic fines for late self-assessment filings, with fines increasing over time. A new system proposed in 2024 introduces a points-based penalty scheme, initially trialed with 100 taxpayers, to be fully rolled out from April 2026 for those with higher income thresholds. The change aims to simplify and make penalties fairer, targeting persistent non-compliance.
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