The Chancellor’s 26th November budget has been announced, the headlines have faded, and our thoughts are turning to enjoying the festive period. Beyond the headline-grabbing freezes on tax allowances and increased tax rates for investment income, there were some important changes tucked away in the paperwork—that could affect your finances sooner than you think.
The Hidden Changes
Not everything made the headlines. There were some important changes to the tax administration rules for individuals which you should be aware of.
Making Tax Digital (MTD): There will be a soft landing for the first cohort of MTD-compliant individuals—no penalties for late submissions in the first year. This gives taxpayers time to get familiar with the new reporting obligations.
New penalty system (from April 2027): The focus will be on late tax payments, not late returns.
- 16 days late = 4% penalty
- 31 days late = another 4% penalty
- After that = 10% of unpaid tax
Plus, late payment interest currently sits at 6.5% per annum.
While this feels fairer than penalties for late returns with no tax due, which could quickly escalate into the thousands, don’t get complacent. Filing late could mean you pay the incorrect amount of tax (see penalties above!) and also mean you miss deadlines for claims and elections that reduce your liability.
PAYE vs Self-Assessment liabilities : Less Flexibility Ahead
Currently, if you have both PAYE income and self-assessment obligations (e.g., rental income), you can choose to pay rental tax via self-assessment rather than through your PAYE code. This gives you flexibility to manage cash flow and generally gives a small deferral in paying the tax due.
From April 2029, that flexibility will be reduced. Where individuals have both PAYE income and other self-assessment liabilities, HMRC plans to collect more self-assessment liabilities through PAYE code adjustments, even using estimates for current-year income.
This could lead to variable monthly income from your employment, as HMRC tries to keep up -something to watch closely. Given the struggles they have with the current PAYE system, we can only imagine the confusion this is going to cause our clients. We will keep you updated as further information becomes available.