Autumn Budget 2025
It is pleasing to see that a “soft landing” has been announced, so that there will be no penalties for those entering MTD in 2026/27 in respect of their quarterly updates, if filed late. The annual penalty will still apply though, so all those being introduced to the system form April 2026 must ensure they have their affairs in order before the deadline of 31 January 2028.
New tax geared penalties for individuals
For those taxpayers within self-assessment, but outside of MTD, known as NMSAs (non-mandated self-assessment), a penalty reform will be introduced from 1 April 2027. If tax is paid 16 days late, the penalty will be 4% of the tax due, with a further 4% at day 31. The per annum rate will be 10% of the tax unpaid.
This brings the late payment charges in line with those for taxpayers that will be within MTD.
Mandatory collection of income tax through PAYE
It is currently possible, but not compulsory, for an individual to have unpaid taxes that were declared through self-assessment to be deducted from their monthly employment earnings subject to a maximum of £3,000 per annum. From 6 April 2029, subject to certain, at this stage unannounced, criteria, it will be a requirement that these back taxes are collected through the PAYE system.
This will accelerate the collection of taxes by the Treasury, rather than the current once or twice per year tax payment system through self- assessment.
