Traditionally, missing a filing deadline as a UK Taxpayer meant an immediate fine. In the case of Self Assessments, the late penalty was an automatic £100, even if you were only out by a day; suddenly, leaving it to the last minute sounds much less appealing.
We’re currently in the pilot phase, however, of a very star-chart-on-the-wall-adjacent points-based penalty system, wherein taxpayers will accumulate penalty points for missed deadlines. Financial penalties will only apply once a specific threshold is reached. Understanding this new system is the first step towards compliance for landlords and self-employed individuals – especially as the UK moves further into the Making Tax Digital era. Plot twist: it might be the other way around.
How It Works
Under the existing system, HMRC issues penalties when taxpayers fail to submit returns or reports on time. These penalties then escalate depending on how late the return is filed. For Self-Assessments, for example, you receive a £100 initial fine immediately after the deadline, increasing by £10 per day after three months (up to £900). Additional penalties after six and twelve months are based upon the tax owed or a fixed charge.
Easier on those who make one-off mistakes, but harder on repeat offenders, the new system works a bit like points on a driving license, except you can’t get out of it with a speed awareness course. Every time a taxpayer misses a deadline, they receive one penalty point. These points accumulate until the individual reaches a set threshold (which varies by filing frequency) at which point a penalty is issued.
The Thresholds
| Submission Frequency | Penalty Threshold |
|---|---|
| Annual | 2 points |
| Quarterly | 4 points |
| Monthly | 5 points |
After the threshold is reached, each additional late submission incurs an additional £200 fine until compliance improves.
Can Penalty Points Be Removed?
Penalty points are not permanent; in many cases, they can expire after a period of good compliance. They’ll automatically expire after 24 months if the threshold is not met, or according to the below frequencies of submission:
| Submission Frequency | Points Reset After… |
|---|---|
| Annual | 2 annual returns are submitted on time |
| Quarterly | 4 quarterly returns are submitted on time |
| Monthly | 6 monthly returns are submitted on time |
How to Avoid HMRC Late Submission Penalties
Avoiding penalties largely comes down to organisation and planning. Practical steps include:
Use compatible accounting software
Making Tax Digital requires digital records and compatible submission tools.
Set deadline reminders
Automated reminders can help ensure quarterly and annual filings are not missed.
Submit returns early
Submitting days or weeks before the deadline reduces the risk of last-minute issues.
Work with a professional
Professional advisors can manage submissions and ensure compliance with HMRC rules.
While the new system may seem like an added complication or another set of rules to follow, it actually means that penalties are less severe for accidental misses or lapses in judgement. At EK Williams, we can help you understand the points-based system and remain compliant in your HMRC Reporting.
Need help keeping your points at zero? get in touch with our team today.