The changes could affect up to 3.6 million people and have raised concerns about financial pressure during the transition. Although the Government says taxpayers will not owe more overall, business organisations warn that paying earlier could leave sole traders struggling to manage their cash flow.
Why HMRC Wants Self-Employed Workers To Pay Tax Earlier
Under the current system, self-employed workers submit an annual Self Assessment tax return, with outstanding liabilities generally due by 31 January. Those whose tax bills exceed £1,000, and who have not already paid at least 80% of their tax at source, must usually make payments on account.
These advance payments are divided into two equal instalments, due in January and July, based on the previous year’s tax liability. A subsequent balancing payment or refund accounts for any difference once the final return has been submitted.
According to Which?, around 30% of the 12 million people filing Self Assessment returns currently make payments on account, potentially placing 3.6 million taxpayers within the scope of the proposed changes.
The existing arrangements can create a considerable gap between earning income and paying tax. The first advance payment may fall 10 months into the tax year, while the final liability can remain unsettled for up to 22 months.
From April 2029, ministers intend to introduce more frequent payments throughout the year, although the precise timetable has not been confirmed. The Treasury forecasts that the change will bring forward approximately £1.3 billion in its first year, rising to £1.8 billion two years later.
The proposals follow the introduction of Making Tax Digital requirements in April 2026 for sole traders and landlords with qualifying income exceeding £50,000. These rules require quarterly income and expenditure updates alongside a final year-end declaration, while retaining the existing January payment deadline.
Business Groups Warn of Financial Pressure During the Transition
The principal concern involves the overlap between existing tax obligations and payments under the proposed arrangements. During 2029, some self-employed workers could be paying outstanding liabilities from previous tax years while also making instalments towards their current-year tax bills.
According to the Birmingham Mail, the Federation of Small Businesses has urged Chancellor John Healey to abandon the proposals, describing the potential transition as “a year of double taxation” that could undermine investment and growth.
The Office for Budget Responsibility estimates that the changes could remove £17 billion from self-employed people’s cash reserves in 2029–30 alone.
The pressure could be particularly difficult for businesses receiving irregular payments. Research from the Association of Independent Professionals and the Self-Employed suggests that one in three self-employed workers has less than three months of business expenses in savings.
John Toovey, from the association, warned that workers could face previous-year liabilities and current-year instalments simultaneously, placing additional strain on businesses.
According to the Express.co.uk, Which? recommends that affected taxpayers prepare by setting aside money when payments arrive, maintaining accurate financial records and submitting returns early.
The consumer organisation also advises chasing overdue invoices, checking PAYE coding notices where relevant and consulting accountants about the transition. The Government maintains that the reforms will change when tax is collected rather than increase the total amount owed. The detailed payment schedule remains unconfirmed.
