Self-assessment late filing penalties to be replaced with new points system

30th November 2017

Late filing penalties for inadvertently missing self-assessment tax return deadlines could soon be a thing of the past.

The Treasury is preparing to unveil plans which would scrap immediate £100 fines for taxpayers who unintentionally miss deadlines and replace them with a new “holistic” points-based system.

Sources from HM Revenue & Customs (HMRC) claim the changes from the tax authority are designed to focus on “people who really don’t care about playing by the rules” and give those taxpayers who make genuine errors of judgement a chance to redeem themselves.

At present, all taxpayers within the self-assessment tax return system that fail to submit their returns by 31st January each year are liable for instant £100 fines, which rises periodically the longer the return remains outstanding. In 2017, some 840,000 taxpayers reportedly missed the deadline.

Fines scrapped until four penalty points are accrued

The new points-based system will adopt a similar approach to the UK’s driving licence points system, with taxpayers only required to pay a fine when they miss deadlines and in a response to a Consultation published earlier this year, a limit of four points was discussed. 

It is anticipated that one missed deadline will equate to one penalty point. 

As with the driving licence system, the points would be reset to zero provided the taxpayer was fully compliant for a set period. Both 12 and 24 months were discussed in the Consultation.  

The plans, disclosed by Chancellor of the Exchequer, Philip Hammond, in last week’s Autumn Budget 2017, state: “The Government will reform the penalty system for late or missing tax returns, adopting a new points-based approach.

“It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This will ensure that the system is fair, simple and effective across different taxes.

“Final decisions on both measures will be taken following this latter consultation.”

Self-assessment penalty reforms a chance to help taxpayers learn from their mistakes

Anita Monteith, Senior Policy Adviser, Institute of Chartered Accountants in England and Wales (ICAEW), welcomed the news and hoped this new system would encourage taxpayers to “learn from their mistakes rather than having to pay for them”.

“[The] self-assessment system is one that people should be familiar with,” said Monteith.

“Tax is complicated – there is enough for individuals to worry about without being fined for minor transgressions rules that they might not have known about.”

The Association of Taxation Technicians (ATT) believes the proposals to reform the self-assessment penalty regime are sensible, but insists on a comprehensive consultation on the details of a new points-based system, warning its potential to throw up some anomalies.

Yvette Nunn, Co-Chair of ATT’s technical steering group, warned that “some persistent defaulters might avoid a penalty, while some more compliant taxpayers could incur a penalty”.

Meanwhile Paul Aplin, Vice-President of ICAEW, also welcomed the reforms but voiced his disappointment that HMRC would not be taking immediate steps to correct the unfairness of the existing penalty regime.

“Restoring the previous system would have restored fairness at a stroke and would not have prevented a more comprehensive points based penalty system being introduced subsequently,” said Aplin.

Your local TaxAssist Accountant can keep you up-to-date with everything you need to know about the self-assessment tax return penalty regime and any impending deadlines. For a fixed, competitive price they can complete your tax return online – ahead of the deadline – and liaise with you directly on the amounts to be paid and when they are due.

To arrange a free initial consultation with your nearest TaxAssist Accountant on your self-assessment affairs, call us today on 01743 366669 or drop us a line using our online enquiry form.

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