The fairness of payments on account in the UK’s HMRC self-assessment system is a nuanced issue with valid arguments on multiple sides.
Arguments for fairness:
The system serves legitimate purposes – it helps HMRC manage cash flow and reduces the administrative burden of collecting large lump sums annually. It also mirrors how employed people pay tax through PAYE throughout the year, creating more consistency across different types of taxpayers. For those with stable, predictable incomes, it spreads the tax burden evenly rather than creating a potentially difficult annual payment.
Arguments against fairness:
The system can create genuine hardship, particularly for those with irregular or declining incomes. Someone whose income drops significantly may still be required to make payments based on their previous year’s higher earnings, creating cash flow problems. This is especially challenging for freelancers, contractors, or small business owners whose income can fluctuate substantially.
The system also assumes income stability that doesn’t reflect modern working patterns. The six-month gap between the July and January payments can be problematic, and the relatively high threshold for reducing payments on account (requiring a significant drop in income) means many people get caught in difficult situations.
The practical reality:
While HMRC does allow reductions to payments on account when income is expected to fall, the process isn’t always straightforward, and many taxpayers either don’t know about this option or find it cumbersome to navigate.
The system works reasonably well for those with stable, growing incomes but can feel punitive for those experiencing income volatility – which describes an increasing portion of the modern workforce. Whether that makes it “unfair” depends partly on whether you view the system’s efficiency benefits as justifying the individual hardships it can create.Retry
Claude can make mistakes.
Please double-check responses.
Research
Sonnet 4
Leave a Reply