Two penalty regimes are running side by side, and a lot of published guidance has merged them into one. That matters, because the penalty you face depends entirely on which one you are in.
Here is both systems, who is in each, and how appeals actually work.
Which regime applies to you
Most taxpayers are still on the long-standing £100 / £900 / 5% system.
The points-based regime commenced on 6 April 2026, but only for taxpayers mandated into Making Tax Digital for Income Tax — currently sole traders and landlords with qualifying income over £50,000 — plus people who have volunteered for MTD. From April 2027 it extends to everyone filing a personal Self Assessment return.
If you are not in MTD and have not volunteered, the points system does not apply to you yet. Any article telling you “Self Assessment now uses penalty points” without that qualification is describing next April, not this one.
Some returns are outside the new regime entirely: partnership returns, trust and estate returns, and non-resident company returns all stay on the old system.
Regime 1: the standard penalties
| Lateness | Penalty |
|---|---|
| Immediately after the deadline | £100 — charged even if you owe no tax |
| 3 months late | £10 per day for up to 90 days — maximum £900 |
| 6 months late | 5% of the tax due or £300, whichever is greater |
| 12 months late | A further 5% or £300, whichever is greater |
The £100 is automatic and applies whether you owe £40,000 or nothing at all. On a return six months late, expect the full £900 of daily penalties as well.
Late payment is charged separately. You get penalties of 5% of the unpaid tax at 30 days, again at 6 months, and again at 12 months, plus interest at 7.75% throughout.
A return that is a year late with £10,000 of tax outstanding therefore attracts £100 + £900 + £500 + £500 in filing penalties, plus £500 + £500 + £500 in payment penalties, plus interest. Just over £3,500 on top of the tax.
Partnerships: if a partnership return is late, every partner is charged a penalty. Not just the nominated partner who was supposed to file it.
Regime 2: the points-based system
Under the new regime you get one point for each missed quarterly update or return deadline, rather than an immediate fine.
- Threshold: 4 points, at which HMRC charges £200
- After that, £200 for every subsequent missed deadline
- Below the threshold, points expire 24 months after the missed deadline
- At the threshold, points do not expire automatically — you must file on time for 12 months and submit all outstanding items for the previous 24 months before they clear
- The threshold drops to 2 points for people under the new regime who submit annually only — there are fewer deadlines to miss, so the allowance is smaller
That last point is widely misreported. The 4-point threshold is not reduced for the £30,000 cohort mandated into MTD from April 2027. They send quarterly updates plus a tax return, so they keep 4 points. The 2-point threshold applies to people inside the new penalty regime who have no quarterly obligations: someone who becomes exempt from MTD during 2027/28 but stays under the new penalties, and — from April 2027, when the regime extends to everyone filing a personal Self Assessment return — ordinary annual filers outside MTD.
If you already hold points when your threshold moves from 4 to 2, HMRC reduces them so you are no closer to the new threshold than you were to the old one. Three points against a 4-point threshold becomes one point against a 2-point threshold.
New late payment penalties come with it, and they are structured very differently from the 5% charges:
| Timing | Charge |
|---|---|
| Days 1–15 | Nothing |
| Day 15 (where the debt is outstanding days 16–30) | 3% of the tax owed |
| Day 30 onwards | A further 3% at day 30, plus 10% annualised charged daily from day 31 until the tax is paid, or for up to 2 years |
For 2027/28 the 3% figures become 4%. A first-year concession gives you 30 days to pay or agree a payment plan before penalties start, reducing to 15 days after that. As under the old system, late payment penalties do not apply to payments on account — interest still does.
There is also a grace period worth knowing about: for 2026/27, no penalty points are charged for late quarterly updates. Digital record keeping and quarterly updates are still legally required, and late return and payment penalties still apply in full.
What counts as a reasonable excuse
A reasonable excuse is something that stopped you meeting an obligation for a valid reason. HMRC’s published list includes:
- Your partner or another close relative died shortly before the deadline
- You had an unexpected stay in hospital that prevented you dealing with your tax affairs
- You had a serious or life-threatening illness
- Your computer or software failed while you were preparing your online return
- Problems with HMRC’s online services
- A fire, flood or theft prevented you completing your return
- Postal delays you could not have predicted
- Delays related to a disability or mental illness you have
- You were unaware of, or misunderstood, your legal obligation
- You relied on someone else to send your return, and they did not
Two of those are worth pausing on. “You were unaware of or misunderstood your legal obligation” and “you relied on someone else to send your return, and they did not” are both on HMRC’s list — and both are the exact opposite of the Companies House position, where reliance on an accountant is explicitly rejected as an excuse for late accounts. Directors who have been told “ignorance is never an excuse” are working from the Companies House rulebook, not HMRC’s.
In every case you must send the return or payment as soon as you are able to. An excuse that explains a two-week delay does not excuse a two-year one.
What does not count
HMRC is equally explicit about what it will not accept:
- Your cheque bounced or your payment failed because you did not have enough money
- You found HMRC’s online system too difficult to use
- You did not get a reminder from HMRC
- You made a mistake on your tax return
Inability to pay is not a reasonable excuse for late payment. If money is the problem, the answer is a Time to Pay arrangement, not an appeal.
How to appeal
You have 30 days from the date the penalty was issued to appeal. Miss that and you will need to explain why you were late appealing as well.
Before you start, gather: the date the penalty was issued, the date you filed the return, the date you paid the tax, and the details of your reasonable excuse with dates attached.
HMRC’s online tool routes you to either an online appeal or a downloadable form — SA370 for an individual penalty, SA371 for a partnership one. If you are appealing a different type of direct tax penalty, follow the instructions on the penalty letter.
Consider paying the penalty while you appeal. If the appeal is rejected, interest runs on the penalty from the date it was due until you pay it. If HMRC agrees with you, they repay what you paid with interest.
If you did not need to file at all, you do not need a reasonable excuse — you ask HMRC to cancel the penalty on the basis that no return was due. That is a separate and usually stronger argument.
What happens after you appeal
If HMRC does not change its decision, you will be offered a review by an officer not involved in the original decision. You can also request a review at any time after appealing, without waiting for the outcome.
Beyond that, you can take the appeal to the First-tier Tribunal (Tax). If you have already asked for a review, you must wait for its outcome first.
No accountant can guarantee a particular result. What you control is the evidence: dates, correspondence, medical letters, error messages, screenshots of failed submissions. Appeals succeed on documented facts, not on tone.
Frequently asked questions
Does the points-based penalty system apply to my Self Assessment return?
Only if you are mandated into Making Tax Digital for Income Tax or have volunteered for it. Everyone else is still on the £100 / £900 / 5% system until April 2027, when the points regime extends to all personal Self Assessment returns.
Do I get a £100 penalty if I owe no tax?
Yes. Under the standard regime the initial £100 late filing penalty applies regardless of whether there is any tax to pay.
How long do I have to appeal a Self Assessment penalty?
Usually 30 days from the date the penalty was issued. If you miss that window you can still appeal, but you will need to give a reason for the delay.
Is relying on my accountant a reasonable excuse?
HMRC’s published list of reasonable excuses includes relying on someone else to send your return where they did not. That is different from Companies House, which explicitly rejects reliance on an accountant for late accounts. You must still file as soon as you are able.
Can I appeal a penalty if I did not need to file a return?
Yes, and you do not need a reasonable excuse to do it. You ask HMRC to cancel the penalty on the basis that no return was due for that year.
Not being in this position next year
The cheapest penalty is the one that never gets charged. Most late returns are not deliberate — they are records that never quite got finished, and a deadline that arrived faster than expected.
SmartFiling files Self Assessment returns for a fixed fee with a three-week turnaround from receiving your records, including MTD for Income Tax where it applies. Every return is reviewed and signed off by an ICAEW Chartered Accountant.
