HMRC’s new late submission points system: here’s how it’ll work

HMRC is changing the tax return penalty system, aiming to punish repeat offenders and be more lenient towards those who make the odd mistake.

• When is the Self Assessment tax return deadline?
• 7 self-employed tax changes
• A guide to VAT for small businesses
• Tax and Self Assessment resource

Penalties will be points-based rather than automatic. This means that those who consistently miss deadlines will accrue more points – and pay a larger fine than what’s in force currently.

Here’s what to watch out for when the new HMRC late submission penalty system starts.

When does the HMRC late submission points system start?

There are different start dates depending on your tax obligation. The new points based penalty system will start from:

• 1 January 2023 – for VAT-registered businessses with accounting periods starting on or after 1 January
• 6 April 2026 – for Self Assessment taxpayers with business or property income over £50,000 per year (who will need to send digital quarterly updates through Making Tax Digital)

The date the points system will come in for Self Assessment tax payers hasn't been confirmed yet.

For businesses registered for VAT, the first monthly returns and payments affected by the penalties are due by 7 March 2023.

Updated 21 December 2022 to reflect the new timeline for introduction.

How will HMRC penalties work under the new points system?

Instead of getting an automatic fine if you miss a deadline, under the new system you’ll get a penalty point.

The more deadlines you miss, the more points you get, until you reach your penalty threshold. Then you get a £200 fine (and another £200 fine for every subsequent deadline you miss).

Your penalty threshold depends on how often you have to make a submission:

• annually – two points
• quarterly (e.g. VAT and Making Tax Digital for Self Assessment) – four points
• monthly – five points

There are separate points totals for each obligation you have. This means that if you fail to meet one obligation but successfully meet others, you’ll only accrue one set of points.

But if you fail to meet multiple obligations, points will accrue for each – even if they have the same submission frequency. This could result in heavy fines if you consistently miss deadlines across all of your responsibilities.

In general, if you make two late submissions relating to the same obligation in one month, you’ll still only get one point. HMRC says this is to give taxpayers a chance to improve without too many points accruing.

But there are some exceptions to this, relating to the Self Assessment obligations through Making Tax Digital starting in 2026. For example, if you have a quarterly Self Assessment deadline and an annual return due in the same month, you’ll get two points if you miss both.

When do HMRC late submission points expire?

Points last for two years, as long as you hit subsequent deadlines and don’t reach the penalty threshold.

But after you’ve reached that threshold, your points will only reset to zero when you’ve hit all of your deadlines for a particular time period:

• two years for annual submissions
• 12 months for quarterly submissions
• six months for monthly submissions

You also need to have submitted all that was due over the previous two years.

What else should I know about the new HMRC late submission penalty system?

• HMRC has a time limit to apply points (for example it can’t apply a point after 48 weeks from the day of a missed annual submission)
• HMRC can decide not to issue points and penalties under particular circumstances
• you can appeal an HMRC point or penalty (as long as if you have a reasonable excuse)
• if you already have points and you change your submission frequency for a particular obligation (like VAT), HMRC will adjust your points total accordingly (but if you’re on zero you’ll stay at zero)
• non-standard accounting periods (for example at the beginning or end of a period of VAT liability) have slightly different rules

Check the latest information on the UK government website.

What do you think about HMRC’s late submission points system? Let us know in the comments below.