The Philosophy: “Points Mean Prizes” (But Not the Good Kind)
The new system operates a bit like penalty points on a driving licence. Instead of an immediate financial sting for a single late filing, you accumulate “points.” You only receive a financial penalty once you hit a specific threshold.
This is a significant win for the organized but occasionally overwhelmed business owner. If you miss a single deadline in a blue moon, you won’t be immediately out of pocket. However, if you consistently miss your filing windows, the costs will escalate quickly.
How the Points Thresholds Work
The number of points you can “afford” to accrue before a fine kicks in depends entirely on how often you are required to submit returns to HMRC. Under Making Tax Digital (MTD) for Income Tax, many businesses will move from one annual filing to quarterly updates, meaning more deadlines, and more opportunities to trip up.
Here is the breakdown of the point thresholds:
- Annual Filers (Self Assessment): 2-point threshold.
- Quarterly Filers (MTD for Income Tax & VAT): 4-point threshold.
- Monthly Filers: 5-point threshold.
Example: The Quarterly Filer
Imagine you are a landlord with a property portfolio earning over £50,000 a year. From April 6, 2026, you are required to submit quarterly updates. If you miss your first quarterly deadline, you get 1 point but no fine. If you miss the second, you have 2 points. Only once you miss your fourth deadline and hit that 4-point threshold will HMRC issue a £200 penalty.
Crucially, every missed deadline after you hit the threshold triggers another £200 fine. This makes consistent compliance non-negotiable for maintaining your profit margins.
The 2026 Timeline: Are You Ready?
This points-based system isn’t just a theoretical change; it is tied directly to the MTD for Income Tax roadmap. Mark these dates in your calendar:
- April 6, 2026: Mandatory for self-employed individuals and landlords with an income over £50,000.
- April 6, 2027: The threshold drops to £30,000.
- 2028 and beyond: The government has signaled further drops, potentially down to £20,000.
If you fall into these brackets, you will no longer just be filing once a year. You will be providing quarterly updates of your business income and expenses.
The “Soft Landing” Period: A Breathing Space
HMRC recognizes that transitioning to MTD for Income Tax is a massive operational shift for the UK’s small business community. To help you adjust, they are introducing a soft landing period.
During the first year of the new system (2026-27), HMRC will not charge penalty points for late quarterly updates. This gives you four “free” quarters to get your digital record-keeping in order and ensure your software is communicating correctly with HMRC’s systems.
Note: This soft landing usually only applies to the points. If you fail to pay the tax you owe, the rules are much stricter.
Resetting the Clock: How to Clear Your Points
Points don’t stay on your record forever, but clearing them requires a period of perfect compliance. There are two ways your points total can return to zero:
1. The Time-Based Expiry
If you are below the threshold (e.g., you have 2 points but your threshold is 4), those points will naturally expire after 24 months. This is counted from the month after the one in which you received the point.
2. The Compliance Reset
If you have hit the threshold and incurred a £200 fine, the points don’t just disappear. To reset them to zero, you must meet two strict conditions:
- A Period of Compliance: You must submit all your required returns on time for a set period (12 months for quarterly filers).
- Backlog Clearance: You must ensure all returns due within the last 24 months have been submitted.
Failure to meet these conditions means you remain “at the threshold,” and every single subsequent late filing will result in another £200 fine.
Late Payment Penalties: A Different Beast
It is vital to distinguish between late filing (points-based) and late payment (percentage-based). HMRC has not moved late payments to a points system. If you owe tax and don’t pay it on time, you will still face immediate financial consequences:
- Up to 15 days late: No penalty if you pay in full or agree on a payment plan.
- 30 days late: 5% of the unpaid tax.
- 6 months late: Another 5% penalty (10% total).
- 12 months late: Another 5% penalty (15% total).
These percentages can quickly dwarf the filing point penalties, which is why staying on top of both deadlines—submission and payment—is crucial.
How Sterlinx Global Keeps Your Record Clean
At Sterlinx Global, we understand that managing multiple filing deadlines and points thresholds is a headache. Our approach is simple:
- Proactive Calendar Management: We flag every deadline well in advance, accounting for processing times and your business cycle.
- Digital Integration: We ensure your accounting software is correctly configured for MTD compliance, so you’re never caught out by system glitches.
- Quarterly Reviews: For clients moving to quarterly filing, we conduct a pre-deadline review to catch any issues before submission.
- Point Tracking: We maintain a clear record of your filing history so you always know where you stand relative to your threshold.
- Appeals and Reasonable Excuses: If you do miss a deadline, we work with HMRC to establish whether a “reasonable excuse” applies, which could void the points altogether.
Our goal is to ensure that you never accumulate unnecessary points and that your compliance record remains spotless.
Action Checklist for 2026 Compliance
- ☐ Confirm your income level and check whether you fall into the MTD for Income Tax threshold (£50,000 from April 6, 2026).
- ☐ Review your current accounting software and verify it is MTD-compatible. If not, plan a migration.
- ☐ Create a digital calendar with all quarterly filing deadlines (typically the 19th of the month after the quarter ends).
- ☐ Set email reminders at least two weeks before each deadline.
- ☐ Clear any outstanding returns from previous years to avoid backlog issues when you hit the threshold.
- ☐ Ensure your bank details and payment arrangements are set up so tax can be paid on time.
- ☐ Book a consultation with Sterlinx Global to map out your specific filing obligations and confirm your strategy.
Frequently Asked Questions
Will I get points for VAT late filings too?
Yes. The points system applies to VAT returns as well as income tax. If you are a VAT-registered business filing quarterly, late VAT submissions will also accrue points against the same 4-point threshold. This means a single late filing could trigger points for both income tax and VAT, accelerating your path to the threshold.
What happens if I have a “reasonable excuse” for being late?
HMRC has a defined list of reasonable excuses, such as bereavement, serious illness, or exceptional third-party failure (e.g., your accountant dying in an accident the day before the deadline). If you can demonstrate one of these, HMRC may waive the points entirely. However, the threshold for a reasonable excuse is high, and “I forgot” or “I was busy” will not cut it. If you believe you have a genuine excuse, contact us immediately to submit a formal appeal.
Is the £200 fine per point?
No. The £200 penalty is triggered once you hit the threshold. After that, every additional late filing incurs another £200. So if you are a quarterly filer with a 4-point threshold and you have already hit the threshold, the fifth late filing will cost you £200, the sixth will cost another £200, and so on. The points system itself doesn’t impose per-point penalties until the threshold is breached.
Can I see how many points I have?
Currently, HMRC’s online Self Assessment portal does not display your points balance in real time. However, you can view your filing history, and if you have received notice of a penalty, that will tell you that you’ve hit the threshold. We recommend maintaining your own record of submission dates and cross-referencing them against HMRC’s acknowledgments. Alternatively, contact HMRC directly or ask us to request a points statement on your behalf.
