HMRC wants self-employed tax paid sooner from April 2029, and the switchover could leave sole traders facing overlapping bills. We asked IPSE how you can prepare.
- From April 2029, most sole traders will pay tax in smaller, regular instalments instead of two lump sums in January and July. Nobody’s bill is going up, payments will be collected sooner.
- The switchover could create a double hit, with old bills and new instalments overlapping. IPSE warns that the loss of the gap between payments removes a cashflow cushion many self-employed people rely on.
- There’s time to prepare. Setting money aside as you earn, keeping your books up to date, chasing late payers and speaking to your accountant early can all help you get ready.
From April 2029, the twice-yearly tax bill is set to disappear for millions of self-employed workers, requiring most sole traders to pay HMRC in smaller, more regular instalments instead, as announced in last week’s Budget.
Crucially, nobody’s tax is going up – it’s just being collected sooner.But the switchover could hurt: in the first year, people may still owe their old bills while also paying the new instalments, which the Office for Budget Responsibility (OBR) forecasts will withdraw £17bn from self-employed taxpayers’ cash balances in 2029-30.
We spoke to Josh Toovey, Head of Policy and Research, at The Self-Employed Assosciation (IPSE), to find out what’s changing, why it lands at a tricky time for the self-employed, and what you can do now to prepare.
What tax deadlines are changing, and why?
At the moment, many self-employed people make “payments on account”, which are advance payments towards their next tax bill, normally due on 31 January and 31 July.
From April 2029, taxpayers who make payments on account will be required to make smaller, more regular payments during the tax year in which they earn the income. The Government says the change will modernise the system, which is 30 years old, while HMRC points to payment punctuality, with around one in five self-assessment bills currently being paid late.
Josh Toovey, Head of Policy & Research at IPSE, the self-employed association, explains what that means in practice:
“In practice, it means the twice-yearly tax bill goes. From April 2029, most sole traders and small business owners who file a self-assessment return will pay in regular instalments instead of two big lump sums in January and July.
The Government says nobody’s tax is going up, it’s just being collected sooner. But sooner still means cash leaves the business earlier, and we don’t know yet how often it’ll be taken or how it’ll be worked out. That detail will matter a lot.”
As Toovey points out, it hasn’t been ironed out. Potential options include monthly or quarterly instalments, followed by a final adjustment once your return is filed. Those who also earn through PAYE are expected to pay through PAYE from 6 April 2029.
Why the timing matters for an already stretched group
The change arrives as many self-employed people are feeling the pinch. Our own research found that over a third of founders earn close to minimum wage, and while the Budget gave rates relief to pubs and shops and a tax break to founders who sell up, costs like employer NI, VAT and energy bills stayed put.
Against that backdrop, the transition year could be the toughest. From April 2029, taxpayers would have to settle what they still owe for earlier tax years while also making payments towards the current one. The Office for Budget Responsibility (OBR) forecasts that this overlap will take £17bn out of self-employed taxpayers’ cash balances in 2029-30.
Toovey from the IPSE explains what this gap between payments could mean in practical terms:
“What worries us is that the gap between those two payments is a cushion. A lot of business owners put money aside as they go, and it’s what gets them through a quiet month. Take that away and there isn’t much left, when our research shows a third of self-employed people have less than three months of essential living costs saved.”
There’s an upside, though. Smaller, regular payments could help some taxpayers to budget, and mean fewer nasty surprises in January. However, that only works if your income is steady enough to meet them.
If you’re new to all this, learn how to register as a sole trader. For everyone else, the change is still more than two years away, which leaves time to build a buffer. Here’s where to start.
Nothing changes until April 2029, so your 31 January and 31 July deadlines still stand. As Toovey puts it: “It’s still a few years off, so the best thing business owners can do is use the time.” His advice is to:
- Open a tax pot: “Start putting tax money into a separate account every time you get paid, so there’s a pot building up before the rules change.”
- Keep your books up to date: Knowing what’s coming in each month means you can see what you’ll owe.
- Chase late payers: Late-paying customers are a cashflow risk, and more so when tax is due more often.
- Talk to your accountant early: Ask what the change will mean for your cashflow before the details land.
