What is the HMRC penalty points system?

It is a new late-filing regime tied to Making Tax Digital. Each missed deadline earns a point. When you hit a set threshold, HMRC charges a £200 penalty. Further misses at the threshold add £200 each time. It replaces the old automatic £100 fine approach.

Who will be affected first?

Pilot cohorts moving to digital quarterly updates are first, followed by wider self-assessment groups as Making Tax Digital phases in from 2026. VAT users already operate on a similar model. Sole traders and landlords should plan for more frequent digital submissions and closer deadline control.

How can I avoid penalties under the new rules?

Use one accounting platform, connect bank feeds, and reconcile monthly. Set reminders two weeks before each due date, submit early, and keep backups. If you miss a deadline, file quickly to stop extra £200 penalties. Accurate records and steady routines reduce risk.

Can I appeal a penalty?

Yes. If you had a reasonable excuse, such as serious illness or system outages, you can appeal. Provide evidence, file the overdue return as soon as possible, and submit the appeal promptly. HMRC reviews each case on its merits under the penalty points framework.

How does this change affect investors?

We expect higher demand for accounting software, digital tax tools, and advisory services. The hmrc penalty points system promotes regular digital filing, which supports subscription growth. Short term, small-business costs may rise. Longer term, compliance technology and service providers could see steadier, recurring revenue.

Global Market Insights

January 29: HMRC Penalty Points Rollout Begins This Month, Fines Revamped

ByDanny Kontos January 29, 2026January 29, 2026

The HMRC penalty points system starts rolling out this month as part of Making Tax Digital. It replaces the automatic £100 late filing fine with points that trigger a £200 penalty once a threshold is hit. This shift aims to improve UK tax compliance through regular digital updates. For sole traders and landlords, the new rules will add admin pressure and software costs. For investors, we see rising demand for accounting tools and advice as digital reporting expands from 2026.