Yesterday we posted about proposed changes to the way HMRC wants to tax freelancers – in essence moving to monthly reporting and paying tax based on income forecasts.

This would place an extra admin burden on freelancers and more worryingly it would create cash flow problems of having to pay tax on forecast income which might not have materialised due to client delays or late payment.

The consultation is open until 4th August and we urge all PR freelancers to object to the changes.

To help PR freelancers do that we have prepared this model response.

The email to send it to is timelypayment@hmrc.gov.uk

Response to HMRC Consultation:

Timely Payments in Income Tax Self Assessment (ITSA)

Submitted by: [Your name]

Capacity: Individual respondent — self-employed freelancer (Income Tax Self Assessment taxpayer, no or insufficient PAYE income)

Date: [Date]

Consultation reference: Timely Payments in Income Tax Self Assessment (ITSA), published 23 June 2026, HMRC

Consultation closes: 4 August 2026

Submission route: online form / timelypayment@hmrc.gov.uk

1. Introduction

I am responding to this consultation as a self-employed freelancer whose income is derived wholly or mainly through Income Tax Self Assessment (ITSA), with little or no PAYE income. I therefore fall within the scope of Chapter 4 of the consultation (potential reform of direct Payments on Account), rather than the announced PAYE-based reforms in Chapter 3.

I support the government’s underlying aim of reducing late payment and tax debt, and I recognise that the proposed changes do not increase the amount of tax owed, only its timing. However, I have significant concerns about the practical impact of more frequent, forecast-based direct payments on freelancers whose income is inherently volatile and difficult to forecast, and who are exposed — more than most taxpayers — to the risk of unpaid invoices and bad debts. I set these out below, mapped to the relevant consultation questions.

2. Summary of key concerns

• Administrative burden: more frequent payments (monthly or quarterly) multiply the number of times a freelancer must check, revise and reconcile their forecast, without the payroll infrastructure that PAYE-based taxpayers benefit from.
• Cash-flow risk: freelance income is volatile and does not arrive in smooth instalments. Payments based on a forecast — particularly one derived from a return that may be 12–18 months out of date — risk falling due before the corresponding income has actually been received.
• Bad debts: freelancers routinely invoice for work that is paid late or never paid at all. A system that ties tax liability to forecast or invoiced income, rather than income actually received, risks taxing money that never materialises — compounding the loss of the original payment with a cash outflow to HMRC.

Each of these is addressed in turn below, with reference to the specific consultation questions they engage.

3. Administrative burden

Relevant questions: Q2, Q10, Q13, Q14

The consultation’s own background notes that respondents to the 2021 Call for Evidence already raised “the potential for increased administrative burden” and “the complexity of calculating tax liability accurately in-year.” I do not believe this concern has been resolved by the current proposals; if anything, moving from two payments a year to monthly or quarterly direct Payments on Account (as illustrated in Case Study 4) multiplies the number of occasions on which a freelancer must check whether their forecast is still accurate, decide whether to revise it, make a payment, and later reconcile it against actual liability.

Unlike PAYE-based taxpayers, freelancers have no employer or payroll software to automate this process. For the roughly 4.5 million people with ITSA income only, this burden will often translate directly into higher accountancy or bookkeeping costs — a cost the consultation’s impact assessment does not currently quantify for this group (“the impact of any wider POA policy changes is still to be estimated”).

I would ask HMRC to:

• Quantify the administrative and professional-fees cost of increased payment frequency for ITSA-only taxpayers before settling on a design, not only after.
• Ensure any digital forecasting/revision tool is genuinely quick to use (minutes, not a full return-style exercise), and available free of charge through the taxpayer’s online account.
• Consider a lighter-touch quarterly, rather than monthly, cadence for this group if increased frequency proceeds at all, to limit the number of touchpoints.

4. Cash-flow risk from volatile, unforecastable income

Relevant questions: Q3, Q11, Q12, Q17

The consultation itself acknowledges the core problem: it recognises “the challenges of more timely payment for some ITSA taxpayers, for example where there are delays in receiving the associated income, even where the chargeable activity has already taken place,” and that this is “particularly challenging for taxpayers with seasonal or irregular income patterns.” This describes most freelance income. My concern is that the consultation identifies the problem clearly but does not yet propose a workable safeguard for it.

The proposed design would base forecasts on the taxpayer’s last filed return, which for a freelancer could be 12 to 18 months out of date by the time a payment falls due. Freelance income is frequently non-linear — project-based, seasonal, or dependent on a small number of clients — so a backward-looking forecast is a poor proxy for what is actually being received in any given month or quarter. The Impact Assessment table accepts that “some taxpayers may be required to make tax payments before they have received the associated income, even where the chargeable activity has already taken place” — this is precisely the scenario that would cause serious cash-flow difficulty for freelancers with irregular income.

I would ask HMRC to:

• Ensure any payment obligation can be tied to income actually received in-year (for example via more frequent, lower-friction forecast updates informed by Making Tax Digital data), rather than relying solely on a static prior-year return.
• Provide a fast, low-friction, penalty-free route to revise a forecast downward mid-year, ideally in close to real time, rather than requiring a full re-forecast exercise or proactive contact with HMRC each time.
• Build in an explicit easement or deferral mechanism for taxpayers who can demonstrate demonstrably volatile or seasonal trading patterns, rather than a one-size-fits-all payment schedule.

5. Bad debts

Relevant questions: Q3, Q12, Q27

This is, in my view, the most significant risk the consultation has not yet addressed. The proposal assumes tax should be paid closer to when income is earned or invoiced. But freelancers routinely invoice for work that is paid late, disputed, or never paid at all — whether due to client insolvency, non-payment, or contractual disputes. Under the current annual (or twice-yearly) system, a freelancer can net off bad debts before their tax year closes, so their return reflects income actually received.

Under a system of more frequent, forecast-based payments, there is a real risk that tax would be paid in-year on invoiced or forecast amounts that never materialise as cash, with the taxpayer then having to reclaim the overpayment later. This is a working-capital drain that hits exactly when the freelancer can least afford it — having already lost the underlying payment they were relying on. Given current pressures on payment terms and rising business insolvency, this risk affects a meaningful proportion of the freelance population, yet it is not addressed anywhere in the consultation’s impact assessment, which considers “irregular or seasonal income” but not non-payment or bad debt specifically.

I would ask HMRC to:

• Explicitly consider bad debt and non-payment risk in the design of any direct Payments on Account reform, separately from general income volatility.
• Allow forecasts and in-year payments to be revised promptly to reflect confirmed non-payment or write-offs, without waiting for the annual Self Assessment reconciliation.
• Consider a de minimis or hardship easement for taxpayers who can evidence a material bad debt in-year.

6. Specific recommendations

In summary, and mapped against the consultation’s own questions, I would ask the government to:

• Retain the option of a single annual, or the current twice-yearly, settlement for ITSA-only taxpayers below a reasonable turnover or liability threshold, rather than mandating monthly or quarterly direct POAs for this group (Question 21).
• Base forecasts on more current data where possible (e.g. MTD quarterly updates), rather than a potentially stale prior-year return (Question 3).
• Provide a quick, penalty-free mechanism to revise forecasts downward in-year, including to reflect bad debts and non-payment (Questions 3, 12).
• Introduce explicit safeguards and easements for taxpayers with demonstrably volatile, seasonal, or bad-debt-exposed income patterns (Question 4).
• Provide meaningful transition support and, ideally, funded or low-cost guidance for lower-turnover freelancers who cannot readily absorb additional bookkeeping or accountancy costs (Questions 19, 20, 24).
• Quantify and publish the expected administrative and professional-fees cost to ITSA-only taxpayers before finalising the policy design (Question 27).

7. Conclusion

I welcome HMRC’s stated aim of reducing late payment and tax debt, and I recognise the logic of aligning ITSA more closely with real-time payment. However, for freelancers with volatile, hard-to-forecast income and real exposure to bad debts, a system based on forecast or invoiced income — collected more frequently — risks creating exactly the cash-flow and compliance problems it is intended to solve, unless it is matched with robust, responsive safeguards. I would be glad to provide further detail or evidence on any of the points above if that would be useful to HMRC’s policy design work.

[Your name]

[Contact details]