Earlier tax bills await millions of taxpayers – Is Self Assessment stress about to end?

By Craig Reid, Partner

It is no secret that the Self Assessment tax return deadline is a mad scramble every year and that something needs to change.

It was promised that Making Tax Digital (MTD) for Income Tax would reduce the burden without needing additional tweaks to the tax system, but this seems to no longer be the case.

A new consultation document has been published that could see millions of taxpayers facing earlier payment dates for their tax bills.

What is changing with Self Assessment tax returns?

The frenzy to submit a Self Assessment tax return ahead of the 31 January deadline is mirrored by the same panic to pay the bill.

While taxpayers can take control of their payments, depending on when in the year they submit their Self Assessment tax return, too many are forced to pay in one lump sum or to negotiate an arrangement with HMRC when that is not possible.

Some taxpayers are able to pay their Self Assessment tax bill through PAYE, resulting in a more spread-out way of resolving the outstanding debt.

However, both ways of paying Income Tax will be impacted under the new proposals.

Taxpayers with a PAYE source of income will be required to pay more of their liabilities in-year and this may impact around 2.1 million people.

The 50 per cent cap of PAYE income on the amount of tax that can be deducted is in line for revision, so this could alter the fabric of your tax bill.

Payments on Account (POAs), another form of handling a Self Assessment bill, could see an expanded frequency up from the current two payment dates of 31 January and 31 July.

These suggested measures centre on the forecasted liabilities and those forecasts are expected to be updated in real-time.

If more POAs become standard, this could see earlier tax bill payments for Self Assessment taxpayers that more closely align with payments that are handled through PAYE.

How will the changes affect my tax bill?

As these changes are currently under consultation, there is no guarantee that they will come to pass.

April 2029 is the current start point for any changes to the tax system, so there is plenty of time to assess the impact and prepare accordingly.

There is not expected to be any impact on the amount of tax that you pay through these changes, but it should make bills more manageable.

In turn, this can help you to get a better handle on your finances by giving greater visibility on how your tax bill is going to be managed throughout the year.

When combined with forecasts, there should be greater scope for advanced tax planning that will further reduce the effect of shock bills that can lead to stress from the amount of tax that is owed at any one time.

Having an accountant keep you on track with handling your Self Assessment tax returns will remain important, especially if there is more of a responsibility to handle this as an ongoing issue.

Our team can support you with your current tax obligations and also prepare you for any future changes should they come into effect.

With our support and the changes to the way that taxes are managed, the stressful nature of Self Assessment may soon be a thing of the past.

For full support with Self Assessment, speak to our team today.