The £100 immediate fine for filing a late tax return will be replaced by a driving licence-style points system.
The change will come as part of a series of Treasury reforms which aim to concentrate on serious tax avoidance and not punish taxpayers who make simple errors.
Currently, people who fail to lodge their self-assessment tax return by 31 January are liable to pay an immediate £100 fine, which increases incrementally while the form is outstanding. Last tax year, 840,000 people missed the 31 January deadline.
The Treasury’s plans were revealed in the Red Book, which was published alongside the budget this week, and will be outlined by the chancellor next week.
The document reads: “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.”
It continues: “If a customer achieves a sustained period of good compliance before a penalty is triggered, the points total will be reset to zero.
“A sustained period means that a number of submissions are provided on time for a set period.”
An HMRC source told the Daily Telegraph: “We want to take a holistic approach and not penalise people who trip up and go after people who really don’t care about playing by the rules.”
