Plans unveiled to bring forward income tax payment dates

The government has launched a consultation on proposed changes to the timing of Income Tax Self-Assessment (‘ITSA’) payments.

Under the plans, taxpayers who also receive employment income or a pension through PAYE could have their Self-Assessment liabilities collected during the tax year through adjustments to their tax code, potentially from 2029/30 onwards.

The government is also considering more regular in-year payment arrangements for other Self-Assessment taxpayers, including sole traders and landlords.

If adopted, the proposals will lead to a transitional period, which will see people hit by two years of tax liability in a single year.

And, while the proposal will not increase the amount of tax due, it will bring forward the timing of payment, in some cases by up to 22 months.

Launching the consultation, the government said: “More timely payments for ITSA taxpayers will modernise the tax system and help taxpayers manage their ITSA liabilities more effectively, reducing tax debt and improving compliance.”

Its statement added: “Currently, ITSA tax payments are often made long after the income was received and this can cause ‘bill shock’ especially for individuals who find it difficult to budget for larger lump-sum tax payments.”

The aim is to ensure that paying tax is straightforward for taxpayers and is paid closer to real time, reducing the likelihood of late payments or people falling into tax debt.

The aims of the proposals may be laudable there is a danger that the changes will lead to confusion among the self-employed, entrepreneurs and employers.

And they come at a time when many are already struggling with a raft of changes and increased demands on them, including those created by previous government policy changes and tax increases.

The government has already acknowledged that ITSA taxpayers are experiencing further change in relation to reporting income and expenses through Making Tax Digital (MTD).

There are also questions over how these changes will work in practice.

The consultation will be open until August 4 this year and responses can be made through the Gov.uk website.

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