HMRC's Proposed Changes to Income Tax Payments: What Freelancers, Sole Traders and Musicians Need to Know

Could the way you pay Income Tax be about to change?

HMRC has launched a consultation on proposals that could significantly change when many self-employed people pay their Income Tax. While nothing has changed yet, the proposals could eventually affect freelancers, sole traders, musicians and anyone who completes a Self Assessment tax return.

If you're self-employed, it's worth understanding what's being proposed, who could be affected first, and why now is the time to have your say.

What is HMRC proposing?

At the moment, many self-employed people pay Income Tax long after they've earned the income. Depending on timing, tax can be paid many months after the work was completed.

HMRC is consulting on whether Income Tax Self Assessment (ITSA) payments should move much closer to the point when income is earned, rather than relying primarily on annual balancing payments and Payments on Account.

It's important to stress that this is a consultation, not a change in the law. HMRC is seeking feedback before deciding whether to proceed, with responses to the consultation expected later in 2026.

Why does HMRC want to change the system?

According to HMRC, the current system creates several challenges.

The consultation notes that:

• Around one in five Income Tax bills are paid late

• Income Tax can sometimes be paid up to 22 months after the income was earned

• This contributes to the UK's tax gap

• Many other OECD countries collect tax much sooner than the UK does.

HMRC believes that collecting tax earlier could:

• Reduce large annual tax bills

• Improve budgeting

• Reduce late payment penalties

• Reduce tax debt

• Better align tax payments with when income is earned

• Work alongside Making Tax Digital and other payment reforms.

Who could be affected first?

The proposals would not apply to everyone immediately.

The first phase focuses on people who have both:

• PAYE employment (or pension income), and

• Self-employed or freelance income that is reported through Self Assessment.

For many musicians, this will sound familiar. It's common to have employed income from teaching alongside freelance income from performances, recording sessions, composing or other creative work.

HMRC is proposing that, where possible, additional Income Tax could be collected through an individual's PAYE tax code.

The consultation also considers expanding this approach to people who only have self-employed income in later phases.

What happens to Payments on Account?

Under the current rules, Payments on Account generally apply where:

• More than £1,000 of Income Tax remains to pay, and

• Less than 80% of your Income Tax has already been collected through PAYE.

The consultation asks whether these existing thresholds and safeguards remain appropriate if the payment system changes.

When could these Income Tax changes begin?

The proposed start date is April 2029, for the 2029/30 tax year.

However, one of the biggest concerns relates to the transition period.

During 2029, some taxpayers could potentially be paying:

• Final balancing payments for earlier tax years

• Existing Payments on Account

• New monthly tax payments for the current tax year.

This overlap is one of the main reasons many respondents are concerned about the impact on cash flow.

Are there any potential benefits?

There certainly could be.

For some taxpayers, paying smaller amounts throughout the year may feel more manageable than facing a large tax bill every January.

Potential benefits include:

• More predictable budgeting

• Smaller, more regular payments

• Fewer late payment penalties

• Better alignment between income and tax

• Helping new businesses avoid the shock of their first large tax bill and Payments on Account.

For people who already budget carefully for tax, these changes may not feel particularly different. For others, they could reduce the risk of falling behind.

What are the biggest concerns?

The consultation also recognises that there are genuine practical challenges.

These include:

Cash flow

During the transition period, some taxpayers could face overlapping tax payments, placing additional pressure on cash flow.

Seasonal income

This is particularly relevant for musicians, creatives and freelancers whose income can fluctuate significantly throughout the year.

Forecasting income

The proposals may rely on estimates or forecasts rather than actual income earned, which could create difficulties if earnings change unexpectedly.

Increased administration

More PAYE tax code changes, additional work for employers, accountants and advisers, and greater administrative complexity are all highlighted within the consultation.

Why this matters for musicians

One aspect that stands out is that the consultation specifically recognises the challenges faced by people with irregular income.

Many musicians don't earn a consistent monthly salary. Income can vary depending on touring schedules, performances, recording work, teaching commitments or commissioned projects.

HMRC is actively seeking views on what safeguards or easements should exist for taxpayers whose income fluctuates throughout the year.

That means musicians have an important opportunity to explain how these proposals could work in practice; or where they may create unintended difficulties.

Have your say

Whatever your initial reaction, one thing is clear: your feedback matters and it must be given by August 4th. Here is the HMRC Feedback Form.

The consultation is an opportunity for freelancers, sole traders and musicians to influence proposals before any legislation is introduced.

Questions worth considering include:

• Would paying tax more regularly help your budgeting?

• Would it make managing your finances easier or harder?

• What concerns do you have about the transition?

• What safeguards would you want HMRC to introduce?

Final thoughts

The proposals represent one of the most significant potential changes to the timing of Income Tax payments for self-employed people in many years.

While there are clear aims, such as reducing late payments and helping taxpayers budget more effectively, there are also legitimate concerns around cash flow, forecasting and the realities of variable income.

For musicians and other creative professionals, whose earnings often fluctuate throughout the year, those practical challenges deserve careful consideration.

We'll continue to monitor developments and explain what they mean in plain English as the consultation progresses.

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