HMRC has introduced a new way of fining people for paying their taxes past the annual January 31 deadline. The tax office is rolling out a new ‘penalty points’ system, which aims to make clearer what is owed by those who haven’t paid enough tax in the previous year. It comes as HMRC rolls out the wider Making Tax Digital project, which changes the way people file their self-assessment going forward. The current rule states that those who miss the January 31 deadline face an automatic £100 fine, which would then go up by £900 after three months (£10 a day), then another £300 after six months.

However, that will soon not be the case. Instead, a points-based system is being put in place. Those who are late in paying taxes will rack up points before many charges are implemented. HMRC calls this system “fairer and simpler” than the current one. Under the new rules, Brits receive a penalty point every time they miss a deadline. Fines are then implemented when a person has reached their maximum penalty points. The limit varies depending on how often you file tax returns.

If you file quarterly, as in every three months, you will need to have missed four deadlines within two years to get slapped with the £200 fine.

While penalty points are racked up for every missed deadline, there is a way to get back down to zero. If you have not reached your penalty point threshold after 24 months, HMRC will remove them automatically.

However, HMRC is still applying late penalties for late payments. Taxpayers have up to 15 days to pay overdue tax without facing a fine.

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But if the tax is between 16 and 30 days late, taxpayers will face a penalty payment of 3% of the tax owed on day 15, which is up from the previous 2%.

For taxes that are late by 31 days or more, the new penalty rate is 3% of the balance at day 15 plus 3% of the balance at day 30. The largest jump is related to the ongoing penalty, which is applied daily after day 31.

It has shot up from the previous 4% annual rate on the outstanding balance to the new 10% annual rate on the outstanding balance. Those who aren’t able to pay have to contact HMRC to set up a Time to Pay arrangement. Penalties will be paused if an agreement is reached and deadlines are honoured.