On Tuesday 4 August, a government consultation quietly closes. On Friday 7 August, more than 860,000 sole traders and landlords must file their first Making Tax Digital quarterly update. The deadline made the news. The consultation did not. It should have, because the consultation is the point of the deadline.
For years, HMRC assured the self-employed that Making Tax Digital was about reporting, not payment. Keep digital records, send us a summary four times a year, and nothing changes about when you pay. Strictly, that is still true today. But the consultation closing on Tuesday – Timely Payments in Income Tax Self Assessment – proposes that from April 2029, around 2.1 million people with employment income alongside their self-employment will have tax on their trading profits deducted from their payslips, and it ‘explores’ whether everyone else should pay monthly or quarterly instead of twice a year. Note the order of events: the April 2029 start date was announced at the Budget, months before anyone was asked. Then, in its third question, the consultation asks whether MTD quarterly updates should be used to forecast how much to take. There it is. The quarterly reporting system was the plumbing. Accelerated payment is what runs through it. And a consultation that opens after the decision is not a consultation; it is a courtesy.
Follow the money and the purpose becomes clearer still. The government’s own Budget scorecard shows the measure raising an extra 605 million pounds in 2029-30, then fading to a fraction of that. No new tax is being charged – ministers are at pains to say so. It is the same tax, collected earlier, once. That is not modernisation. That is a one-off working-capital transfer from the bank accounts of plumbers, cleaners and coders into the Exchequer, dressed up as helping people budget.
The official justification for all this digital machinery is error: small businesses supposedly get their sums wrong, costing billions. But hold that thought against what Parliament did in 2024, when it made the cash basis – money in, money out, no accruals, no stock counts, no year-end wizardry – the default way sole traders calculate their profits, precisely because their affairs are simple enough not to need an accountant’s toolkit. You cannot declare in one breath that these businesses are simple enough to be taxed off their bank statements, and in the next that their errors are so dangerous they must file four times a year through commercial software. Both cannot be true. One of them was said to get a policy through.
Here is what makes it indefensible rather than merely irritating. Pay-as-you-go is the defining feature of employee taxation, and it is one half of a bargain. An employee’s tax is deducted from wages that have already been earned, are guaranteed by law, and land on a fixed date – and the employer does all the administration. Around that deal sits a wall of protection: sick pay, holiday pay, pension contributions, redundancy rights, all of which this government is actively extending. The sole trader has none of it. No guaranteed payday. No sick pay. No pension but the one she funds herself. No pay at all for the hours spent quoting for jobs that never land. And, routinely, 60 to 90 day payment terms imposed by corporate customers who would never accept them in return. Under these proposals, the state gets paid before the trader does.
One of our clients is an illustrator who built his trade after a period of homelessness in London. He is not paid for quoting. He has no practical remedy when a big customer sits on his invoice. He lives on the knife-edge of cashflow that every freelancer will recognise. The one accommodation the tax system currently makes to the reality of his working life is time: an annual cycle in which he can see his whole year before he pays. That is the flexibility these proposals would take away – from him, and from a population of craftspeople, sound engineers, embroiderers and tradespeople who never asked for real-time anything.
The transition would be brutal. By the consultation’s own worked example, a self-employed plumber would pay his July 2029 instalment under the old rules while simultaneously starting in-year payments for the new year – roughly eighteen months of tax squeezed into twelve. HMRC’s suggested mitigation is to let him spread the old instalment over a few months. For a business on typical margins, that is not a budgeting inconvenience. It is a solvency event.
HMRC’s justification is that one in five self assessment bills is paid late. But compressing the payment cycle does nothing about why bills are paid late – it simply multiplies the deadlines capable of being missed, by people with no payroll department to catch them. If the government genuinely wants steadier receipts, the tools already exist: Budget Payment Plans let anyone pay weekly or monthly today, voluntarily. Make them visible. Make them flexible. Pay interest on money taken early at the same rate HMRC charges when payment is late – if early payment is such a benefit, the Exchequer will not mind sharing it. And if ministers want the self-employed to pay tax like employees, let them explain why the self-employed are not to be protected like employees – or tell us about the new scheme of sick pay, pensions and payment protections they have neither announced nor costed.
And who, exactly, is being consulted? Independent surveys this year found that only around three in ten sole traders clearly understood what MTD requires of them, that most had heard nothing directly from HMRC, and that many learned of their own legal obligations from accounting-software adverts. This is the population invited to digest a technical consultation document and respond within six weeks, over the summer, while running their businesses single-handed. They have no union, no lobby, and no time to march on a Thursday – which is precisely why their silence could be read as consent. It must not be. History shows these consultations never change the destination, only the speed and the casualties along the route: thresholds get raised, deadlines get deferred, the worst edges get filed off. Those margins matter, and they are won by the people who bother to write in.
So write in. The consultation closes on Tuesday 4 August – a response takes ten minutes, by online form or by email to timelypayment@hmrc.gov.uk, and HMRC has said it particularly wants to hear from the self-employed themselves. And if you are reading this after Tuesday, notice what the timing achieved: the consultation closed three days before the deadline that put this subject in the news. The argument does not close with it. The government responds in the autumn, legislation follows, and the proposals for the self-employed are not yet settled. Our firm has filed its response, and will keep making it. There are four million sole traders in this country. That is a constituency, not a conversation. It is time somebody in government treated it like one.
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Andrew Oury is a Partner at Oury Clark, an integrated firm of solicitors and chartered accountants. Oury Clark’s formal response to the Timely Payments consultation is available on request.
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