Millions of self-employed people and landlords are being advised to brace themselves for significant changes to how they settle their tax bills, with one expert warning that some may encounter overlapping payments when fresh HMRC regulations take effect.
The Government has announced that, from April 2029, taxpayers who presently make payments on account via Self Assessment will need to make smaller, more frequent payments throughout the year. According to HMRC, roughly 3 million taxpayers currently make payments on account, suggesting the alterations could substantially affect sole traders, freelancers and landlords.
Under the existing system, taxpayers generally make two advance payments annually, in January and July, calculated on their previous year's tax liability. The revised arrangements will align payments more closely with when income is actually received, rather than leaving taxpayers facing significant bills months later.
A tax expert has, however, expressed concerns regarding the transition period, particularly as taxpayers will need to settle outstanding liabilities from the preceding tax year while simultaneously commencing payments under the new system. Andy Wood, tax barrister at Tax Barrister UK, said: "The biggest concern with these changes isn't necessarily how much tax people will pay, but when they'll be expected to pay it.
Under the new system, self-employed workers could find themselves paying towards their current year's tax while still settling outstanding bills from the previous year. "That doesn't mean people are being taxed twice, but it could create a significant cash flow challenge, particularly for those who aren't used to putting money aside regularly.
For freelancers, sole traders and landlords with fluctuating income, having to make more frequent payments could put additional pressure on their finances." Although the new regulations won't take effect until April 2029, Andy urged taxpayers to begin rethinking their approach to tax responsibilities well ahead of time.
He said: "One of the most important things self-employed workers can do is start setting money aside for tax as soon as they receive income, rather than waiting until their Self Assessment deadline approaches. Keeping accurate financial records and understanding your expected tax liability can make a considerable difference when planning for these changes.
"It's also worth reviewing how much you currently pay on account and whether those payments accurately reflect your earnings, particularly if your income has fallen.
If you're already struggling to meet tax payments, speak to HMRC or a qualified adviser as early as possible rather than allowing unpaid bills to build up." The Government has confirmed that the reform will change when payments are made rather than increase the total amount of tax owed. However, the exact frequency of payments remains undecided, with further information expected in 2027.
Andy added: "While spreading payments throughout the year could help some taxpayers avoid unexpectedly large bills, the transition needs to be handled carefully. The Government will need to ensure there are appropriate safeguards for people with seasonal income, unpredictable earnings or limited cash reserves.
"Ultimately, taxpayers shouldn't assume that because these changes are still a few years away, there's nothing they need to do now. Preparing early could help avoid a difficult financial adjustment when the new rules arrive." Outlining…
