HMRC consults on faster tax payments: one to watch

As the summer temperatures soared throughout the UK, HMRC released a large consultation document seemingly designed to make many taxpayers even hotter under the collar. It proposed a new regime for the 3.6 million taxpayers within self assessment who make payments on account, many of them self-employed.

At present you have two possible ways of making such payments:

1. As a deduction from PAYE earnings (employment and/or pension income) via an adjustment to your tax code for the tax year in question.
2. In two instalments, the first on 31 January of the relevant tax year and the second on the following 31 July.

If the payments on account do not cover your full tax liability, then a balance payment is made on 31 January in the following tax year.

Unsurprisingly, HMRC do not like the second option. The time gap between the receipt of income and the final tax payment can be as much as 22 months. For example, for income received on 6 April 2026, a balance tax charge could fall due on 31 January 2028. The lag results in late payments being common. HMRC say that about one in five self assessment tax bills are paid after their due date.

The consultation paper proposes two solutions, starting in April 2029. Broadly, these are:

• If the taxpayer also has PAYE income, the payments on account should be collected over the tax year, via a coding adjustment.
• If the taxpayer has no PAYE income – the typical self employed situation – then the payments on account should be collected directly over the tax year, probably by direct debit.

In both instances tax will be collected sooner – good news for the Treasury, but possibly not for the taxpayer. The consultation flags up plenty of complex issues, not the least of which is that in 2029/30 the taxpayer could end up paying:

• a second 2028/29 payment on account (31 July 2029),
• both payments on account for 2029/30 (throughout the year), and
• a 2028/29 balance payment (31 January 2030).

A government response to the results of the consultation should appear alongside the Autumn Budget.

Tax treatment varies according to individual circumstances and is subject to change.

The Financial Conduct Authority does not regulate tax advice.