HMRC to introduce new ‘penalty factors’ system in 2026

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Your assist makes all of the distinction. Learn extra HMRC is rolling out a brand new “penalty factors” system this month that might land forgetful taxpayers with a £200 effective.

The brand new system. proposed by the tax authority in 2024, will first be examined on round 100 taxpayers, as a part of the Making Tax Digital scheme.

Underneath the present guidelines, those that miss the 31 January self-assessment submission deadline get an automated £100 effective. This could improve by £900 after three months (£10 a day), then one other £300 after six months.

The brand new system will see many sole merchants given quarterly deadlines to file updates, after which an end-of-year “last declaration” which is able to exchange the present self-assessment tax return.

Every late quarterly submission will earn one penalty level as a substitute of an automated effective, with 4 factors (or 4 missed quarterly deadlines) leading to a £200 effective.

In the meantime, every late annual submission may also end in one penalty level, however the threshold is decrease, at two factors (or two missed annual deadlines), which may also end in a £200 effective.

<img src="https://static.independent.co.uk/2026/01/23/10/26/iStock-1992272345.jpeg" srcset="https://static.independent.co.uk/2026/01/23/10/26/iStock-1992272345.jpeg?quality=75&width=320&trim=0%2C0%2C0%2C0&auto=webp 320w, https://static.independent.co.uk/2026/01/23/10/26/iStock-1992272345.jpeg?quality=75&width=640&trim=0%2C0%2C0%2C0&auto=webp 640w" loading="lazy" alt="Under the current rules, those who miss the self-assessment submission deadline get an automatic £100 fine" class="sc-1mc30lb-0 ggpMaE"/> Underneath the present guidelines, those that miss the self-assessment submission deadline get an automated £100 effective (Getty/iStock) Whereas this method will have an effect on solely a small variety of folks to start with, it'll start to be rolled out absolutely from April for sole merchants and landlords with annual self-employment and property revenue over £50,000. This threshold can be lowered every year, to £30,000 in 2027, and £20,000 in 2028.

The quarterly penalty factors system won't apply within the first 12 months of the scheme to present merchants time to adapt.

HMRC defined in a paper on the modifications: “The brand new penalty regime is easier and fairer than the earlier system. The brand new system will penalise those that persistently don't comply by lacking submitting and cost deadlines, whereas being extra lenient on those that sometimes fail to satisfy obligations.”

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An HMRC spokesperson instructed Sky Information: “We’re dedicated to serving to prospects get their tax proper to keep away from fines altogether. Our fairer penalty factors system for late returns will imply that solely Making Tax Digital prospects who persistently miss deadlines will incur a monetary penalty.”

HMRC revealed final week that 3.3 million folks nonetheless had but to file their self-assessment tax return, with only a week to go till the 31 January deadline.