Exact groups affected as HMRC is changing how millions pay tax

Exact groups affected as HMRC is changing how millions pay tax Around 3.6 million people face a major change to a system that has been in place for decades Millions of British workers face a new approach to paying tax. The Government has committed to tackling "payments on account" in a major plan that starts in April 2029, transitioning to a system in which people pay more often throughout the year. The reform aims to overhaul the tax system by collecting revenue closer to when earnings are actually generated. Financial experts at Which? suggest this could impact up to 3.6 million Brits, after HMRC revealed approximately 30% of the 12 million who complete self-assessment currently make payments on account. Under existing rules, self-employed people must submit an annual self-assessment return and settle any tax owed by January 31 for the following tax year. For sole traders and landlords with qualifying income over £50,000, Making Tax Digital (MTD) reporting requirements have been in force since April 2026. This mandates submissions of income and expenditure every three months, followed by a final year-end declaration - though importantly, the payment deadline is still January 31. And taxpayers facing a bill above £1,000 who haven't already paid at least 80% of their tax at source must typically make payments on account, reports the Express. These are advance contributions towards the following year's tax liability, divided into two equal instalments payable in January and July, calculated on the previous year's income. A final balancing payment (or refund) then resolves any discrepancy once the return is submitted. The issue, according to experts, is one of timing. Under the current system, the first advance payment can arrive 10 months into the tax year, with the final balance potentially not settled for up to 22 months, creating a substantial gap between earning income and paying tax on it. From April 2029, the Government wants those making payments on account to switch to more regular in-year payments, though it has yet to confirm precisely how the new schedule will operate. Ministers insist people will not pay more tax overall - they will simply pay what they owe sooner. Ensure our latest shopping news always appears at the top of your Google Search by setting us as a Preferred Source. Click here to activate or add us as a Preferred Source in your Google search settings. The Treasury predicts the move will generate around £1.3bn in its first year, climbing to £1.8bn two years later. But tax experts caution that the proposals still lack crucial safeguards. During the transition, old and new payment deadlines are expected to clash, meaning some people may face tax bills for previous years while also paying towards the current one. The OBR estimates this could strip £17bn from self-employed people's cash reserves in 2029-30 alone. For seasonal businesses, paying earlier could hit hard before peak earnings arrive. Research by IPSE suggests one in three self-employed workers has fewer than three months' worth of business expenses in savings. Which? urges affected taxpayers to begin preparing now, before the changes take effect, and has outlined several ways businesses can prepare for the new arrangements. This includes putting aside tax as it's earned, keeping up-to-date records, submitting returns early to gain a clear picture of liabilities, chasing overdue invoices, reviewing PAYE coding notices for those who also receive employment income, and consulting an accountant regarding preparation for the transition.