Millions of self-employed individuals could be required to pay two years' worth of income tax within a 14-month period due to forthcoming changes proposed by HM Revenue & Customs (HMRC). These changes aim to introduce a PAYE-style system for self-assessed income tax payments, shifting from the current biannual payment schedule to automatic monthly deductions from April 2029.
Under the new scheme, taxpayers will make monthly payments towards their estimated tax liabilities. However, in the initial year of implementation, many may need to make additional payments “on account” for the prior tax year. This means that in January 2029, self-employed taxpayers could face their first payment on account for the 2028-29 tax year, with a second payment due in July 2029, followed by the introduction of monthly payments from April 2029 onwards.
Dan Neidle, founder of Tax Policy Associates, expressed concerns about the proposal, stating, “It would be a mistake to do this, and I hope the Government will realise that.”
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The plan includes “timely payment” rules whereby individuals with regular employment or pension income will have estimated Income Tax Self Assessment (ITSA) liabilities for additional earnings-such as rental or freelance income-deducted automatically through PAYE each payday. Those without PAYE income streams might be required to make more frequent monthly or quarterly direct payments.
Mike Warburton, a tax expert at The Telegraph, warned that the proposed system is “an accident waiting to happen,” highlighting potential administrative challenges.
Meanwhile, Charlene Young from stockbroker AJ Bell criticised the plan, suggesting it could generate more administrative burdens: “It’s inevitably going to involve more admin, queries and phoning the creaking doom loop that is the HMRC helpline.” She also stressed the risk of HMRC miscalculating tax forecasts, which could lead to over-collection.
An HMRC spokesperson reassured taxpayers: “No one will pay more tax, and spreading payments more evenly across the year will help customers avoid unexpected lump-sum bills. We recently sought views on how we can smooth any transition period for customers, and we’ll be setting out further details in due course.”