Self-employed workers earning £50,000 could face a tax bill of £19,464 within just 14 months under HMRC's proposed monthly payment system, sparking warnings of a cash-flow squeeze for businesses.
The new system, set to start from April 2029, would require those with PAYE income to pay instalments of Income Tax Self Assessment (ITSA) liabilities each payday. For those without PAYE income, including partners and individuals with carried interest, HMRC proposes replacing the current payment on account regime with monthly or quarterly in-year payments.
What the changes mean for a £50,000 earner
Under the proposed changes, a self-employed worker earning £50,000 would face a £4,866 payment for the previous tax year in January 2029 and another £4,866 in July 2029, on top of monthly payments of £811 from April 2029 to March 2030. This totals £19,464 in just 14 months, according to calculations based on HMRC's consultation document.
For many taxpayers, this would be the single biggest change to tax payments since Self Assessment took effect 30 years ago. The proposals were announced in Budget 2025, with the earliest start date set for April 2029.
Cash-flow concerns for businesses
Ashleigh Wood, Director at DSA Prospect, warned that the changes could put pressure on businesses. "Businesses can plan for a tax bill, but cash flow is much harder to predict. Bringing payments forward risks taking out money out of a business just when it's needed most, whether that's to pay wages, settle supplier invoices, invest in growth, or simply get through quieter trading periods," she said.
"The pressure doesn't disappear because tax is collected earlier. In many cases, it simply shows up elsewhere in the business."
HMRC's response and next steps
An HMRC spokesman said: "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."
The consultation responses will help shape HMRC's next steps, including any future legislation required to implement the changes. The earliest suggested start date remains April 2029.
This change is part of broader efforts to modernise the tax system, but experts warn that the timing of payments could create significant challenges for self-employed individuals and small businesses, who often face irregular income streams.
