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For many individuals and small business owners, the start of the year brings tax firmly into focus. Self-assessment deadlines arrive, tax bills are due, and cash flow is often tested just as the year begins.
So, against this backdrop, the government’s update to HMRC’s Tax Debt Strategy – released back in November – becomes particularly relevant.
Whilst most of the proposals included are still at consultation stage, the direction of travel does seem clear: that tax will increasingly be assessed and collected closer to the point income is earned, rather than long after the event.
Meaning a potentially significant shift for individuals and small business owners from the traditional January payment deadline.
Paying tax earlier – even before income is received?
One of the most notable proposals is HMRC’s intention to:
“Require income tax for Self-Assessment taxpayers with PAYE income to pay more of their Self-Assessment liabilities in-year via PAYE from 6 April 2029…”
A consultation on how this would work is expected in the early part of this year, alongside proposals for timelier tax payment for those with only Self-Assessment income.
At present, many taxpayers pay tax on non-PAYE income such as company dividends, rental income, self-employed profits or investment income well after it’s received.
Under the proposed approach, tax on these income streams could instead be:
- Collected earlier in the year
- Spread across the year via PAYE coding
- Potentially due before the cash is actually received
For individuals who rely on dividends or variable income, this could place new pressure on personal cash flow, even where overall tax liabilities remain unchanged.
Making Tax Digital
This proposal sits alongside the full introduction of Making Tax Digital (MTD) for Income Tax from April 2026 for sole traders and landlords with income over £50,000.
Historically, government messaging around MTD has emphasised that there would be no change to how or when tax is collected.
However, with MTD providing in-year tax estimates, improving visibility over liabilities and reducing under- or over-payments – this does arguably pave the way for earlier collection of taxes too. So could be seen as a mechanism to support earlier payment of tax, not just better record-keeping.
Who will be affected?
These changes – if and when they come into effect – are unlikely to impact everyone equally. Those who may feel the effect most include:
- Company directors who take income largely through dividends
- Individuals with uneven or seasonal income
- Business owners who retain profits during the year and extract them later
- Landlords with fluctuating rental income
- Taxpayers who currently rely on the long gap between earning income and paying the tax
For these groups, the issue isn’t higher tax – it’s timing.
This is a cash-flow conversation, not just a tax one
The biggest risk is assuming this is simply an administrative change.
Because, in reality, earlier tax collection could mean:
- Needing to fund tax payments from savings or borrowing
- Rethinking dividend timing and levels
- Reviewing remuneration strategies
- Adjusting how profits are retained or extracted
- Building tax reserves earlier in the year
So, for small businesses and individuals, this makes forward planning more important than ever.
Practical actions to take now:
Although potential changes are still some years away, early awareness matters. Waiting until consultations become legislation may leave you with limited time to adapt.
Practical steps to take now to prepare include:
- Reviewing how and when you receive income
- Understanding your exposure to irregular or end-of-year income
- Improving cash-flow forecasting
- Stress-testing personal and business finances against earlier tax payment scenarios
We’re here to help
As the consultation process develops, we expect further detail on how these proposals will operate in practice – and who will be affected first.
In the meantime, if you would like to understand what these changes could mean for your personal or business finances, we’re here to start the conversation.
Call us on 0330 058 6559 or email hello@scruttonbland.co.uk
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