On 23 March, the Treasury published a series of documents detailing changes and proposals aimed at modernising and improving the UK tax system as part of what was dubbed ‘Tax Day’.
One of those consultations is looking at the possibility of making self-assessment taxpayers calculate and pay Income Tax more frequently, rather than the current annual requirement. The same changes are also being proposed for small companies in relation to Corporation Tax payments.
In essence, the review aims to create a ‘pay-as-you-go’ system that taxes the self-employed in a similar way to employees. The Treasury believes taxing income in ‘real-time’ would make it easier for self-employed workers to manage their cash flows while also limiting errors or the opportunity for “bending and breaking the rules.”
The consultation suggests using the Making Tax Digital rollout over the next two years to provide up-to-date data and thereby bring “the calculation and payment of tax closer to the point where the income or profit arises.” However, the Treasury has said it does not intend to implement “significant” changes to the timing of income tax or corporation tax payments “within the present parliament.” The consultation closes on 13 July.
All details are correct at the time of writing (12 April 2021)