Global Daily Tax News, New UK Penalties Regime Due 2026 For Income Self Assessment, (Nov 21, 2023)

HM Revenue and Customs has announced when the new penalties regime that was introduced for VAT-registered businesses at the beginning of this year will apply also to self-assessment income tax-payers.

New late payment penalties and a new points-based late submission penalties regime were introduced from January 1, replacing the VAT default surcharge.

HM Revenue and Customs has now confirmed that for income tax self-assessment taxpayers, the changes will be introduced alongside Making Tax Digital (MTD). As such, the changes will be implemented from the following dates:

• for businesses, self-employed individuals, and landlords with income over GP50,000 per year, the changes will apply from the tax year beginning April 6, 2026;

• for businesses, self-employed individuals, and landlords with income over GBP30,000 per year, the changes will apply from the tax year beginning April 6, 2027.

HMRC has said, for all other self assessment taxpayers outside the scope of MTD, the changes will apply "after the introduction for MTD taxpayers."

Under the new regime, for the late submissions of tax returns, a new penalty points-based system applies. A penalty of GBP200 for late submissions will only be issued when the relevant points threshold is reached. Points will accrue separately for instances of non-compliance in relation to VAT and income tax self assessment, and more leniency will be granted to those required to file regularly: five points for monthly filers; four points for quarterly filers; and two points for annual filers.

Taxpayers will be able to reset their points to zero by submitting all returns before the due date for a set period of time: 24 months, for annual filers; 12 months, for quarterly filers; and 6 months, for monthly filers. They must also have filed all outstanding returns for the previous 24 months.

If a payment is more than 15 days overdue, the taxpayer will pay a first late payment penalty. If the payment is more than 30 days overdue, the first late payment penalty increases and a second late payment penalty will also apply.