Budget: Self employed to pay tax by direct debit

26 Nov 2025

Buried in the Budget documents is an interesting move that will move self employed from paying half their estimated tax bill on account in July and a half (plus a balancing payment) in January of each year. The government wants to take full advantage of Making Tax Digital and collect payments more frequently from the 4.39 million self employed people in the UK.

For many of the self employed, this will remove the dreaded twice yearly ‘Have I got enough cash to pay my tax bill?’ dilemma, but will introduce constraints on cash flow for others, who use fluctuations in income throughout the year to fund expenses knowing that the income will arrive in time to settle their tax affairs.

More timely payment for Self Assessment – The government will require income tax Self Assessment taxpayers with Pay As You Earn (PAYE) income to pay more of their Self Assessment liabilities in-year via PAYE from April 2029. The government will publish a consultation in early 2026 on delivering this change, and on timelier tax payment for those with only Self Assessment income.

VAT and PAYE timely payments – The government will publish a consultation in early 2026 considering ways VAT and Pay As You Earn (PAYE) liabilities can be paid promptly without the taxpayer falling behind on their payments, including requiring more tax payments by direct debit.

– Policy paper, Budget 2025

Headlines from the 26th November Budget

Taxation

Income tax thresholds frozen for another three years until 2031
Cash ISA savings down to £12k from £20k – Option to invest in Stocks and Shares ISA to top up the missing £8k
Basic and higher income tax rates on property, savings and dividends up 2%

Salaries

Minimum wage for over-21s up from £12.21 to £12.71
Minimum wage for 18-20s up from £10 to £10.85
Pension contribution salary sacrifice capped at £2,000 a year from 2029
2 Child tax credit removed

Cars

5p Fuel duty cut extended to September
3p/mile tax for electric vehicles (1.5p for hybrids) from 2028
Regulated rail fares frozen (This won’t stop most off-peak fares rising!)

Housing

Properties worth over £2m to face council tax surcharge of £2500 to £7500

Business imports

£135 de minimis on imports to end for low value imports.
- (This really won’t bother the likes of Temu as a) they’re so cheap a bit of tax will make them ‘very cheap’ instead of ‘mega cheap’ and b) they’re laser focused on local selling anyway!