HM Revenue and Customs (HMRC) is set to implement a significant change to how millions of taxpayers settle their bills, a move described by experts as an "unpleasant" surprise that will see the taxman take money from households earlier.
What is HMRC's New Plan?
According to official documents, the government will require individuals who pay tax through both Pay As You Earn (PAYE) and Self-Assessment to pay a greater portion of their Self-Assessment liabilities in-year via their PAYE code from 6 April 2029. This means HMRC will gain the power to collect tax from self-employment and other non-PAYE income sources on a regular monthly basis throughout the tax year, rather than in a lump sum the following January.
The Treasury states that a consultation on delivering this change, alongside plans for "timelier tax payment" for those with only Self-Assessment income, will be published in early 2026.
Expert Warns of 'Confiscation' and Implementation Woes
Prominent tax specialist Mike Warburton has issued a stark warning, suggesting the government's motive is to improve its own cash flow at the expense of taxpayers. He told the Telegraph that an "alternative view" of the policy is that it represents "yet another way for the Government to collect tax earlier, because they would rather have the cash in their bank account than yours."
Accountancy professionals have also expressed deep scepticism about HMRC's ability to administer the change smoothly. One accountant warned it would be "an unmitigated disaster" for the revenue body, highlighting the existing complexity and frequent errors in PAYE coding notices. They stated that anyone familiar with the current system can only look at the proposed complications "with horrified fascination."
Broader Context and Potential Impact
This initiative follows the broader rollout of Making Tax Digital (MTD) for Income Tax, which is scheduled to begin in April 2026 for sole traders and landlords with income over £50,000. The government argues that both MTD and the new in-year payments will provide customers with better in-year tax estimates and improved cash flow visibility, reducing risks of under or overpayment.
However, critics contend that the primary effect will be a substantial shift in the timing of tax payments, effectively providing the Treasury with an interest-free loan from taxpayers. The change, emerging in the wake of the Labour Party's first Budget, is set to alter the financial planning of countless self-employed individuals and landlords across the UK from the end of the decade.
