Most people who complete a Self Assessment tax return are used to paying their tax in two instalments each year through the payments on account system.
But that could change.
HMRC has launched a consultation looking at whether tax payments should become much more regular, with monthly or quarterly payments being considered for many taxpayers.
Who could this affect?
It could affect many people who complete a Self Assessment tax return, including:
Sole traders
Company directors who receive dividends
Landlords
Investors
Anyone with income that isn’t fully taxed through PAYE
The idea is that paying smaller amounts throughout the year could make tax bills easier to manage and reduce the shock of large payments in January and July.
At the moment, this is only a consultation so nothing has been decided. However, it fits with the direction HMRC has been heading for some time.
We’ve already seen HMRC move towards more digital reporting through Making Tax Digital. This latest consultation suggests they may also want people to pay their tax closer to the time they earn it, rather than many months later.
What should you do?
For now…absolutely nothing!
The current payment system remains exactly the same, so there is no need to change how or when you pay your tax. We’ll continue to monitor the consultation and keep you updated if any changes are announced.
In the meantime, if you’re already putting money aside each month for your tax bill, you’re likely to be in a much stronger position whatever HMRC decides. As always, if you’re unsure how any future changes might affect you, we’re only an email or phone call away.