HMRC had a recent consultation aimed at self employed to pay Income Tax monthly or quarterly. The earliest date for change, if the plans proceed, is April 2029.
Many of us in the profession were suspecting a move such as this after the implementation of MTD. Opportunities are still there to influence the outcome, although the formal consultation is closed, the feedback received will shape the final design. Keeping an eye on HMRC’s published summary and any subsequent draft legislation to give feedback and contact your local MP
Why HMRC say they are considering the change
- Reducing the gap between earning and paying tax – under the current system, income earned in April 2025 may not be paid to HMRC until January 2027, a delay of up to 22 months.
- Smoothing cash‑flow pressures – large January and July bills can cause financial strain and increase the risk of tax debt.
- Aligning with international practice – many other OECD countries collect tax more contemporaneously with income.
- Supporting MTD goals – more regular payments fit with the broader move to real‑time tax reporting.
Professional bodies have already submitted detailed responses – the ICAEW Tax Faculty, the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) have all indicated they will provide formal comments, focusing on practical issues such as the flexibility to update income forecasts and the impact on seasonal earnings.
What This Means
- Cash‑flow planning remains essential – even though the exact design is still being finalised, the direction is toward more frequent tax collections. It is always worth setting aside a regular amount each month rather than relying on two lump sums.
- Record‑keeping must be up‑to‑date – accurate, timely profit and loss information will be needed to keep forecasts realistic.
- Potential overlap in the first year – if the new system starts in April 2029, the initial period could see taxpayers effectively paying under both the old and new regimes, creating a temporary cash‑flow squeeze. Early advice can help mitigate this.
- Communication with employers/pension providers – PAYE tax codes may need adjusting more often;
