The Chancellor's plan to balance the public finances by the end of the decade faces significant uncertainty over a tax policy centred on changing how millions of self-employed people pay their dues, official forecasters have warned. The Office for Budget Responsibility said its confidence in the government's tax avoidance crackdown, which is supposed to raise an extra £3.6billion a year by 2031-32, is 'very uncertain'. The Chancellor left just £15billion of headroom to meet his fiscal rule of funding day-to-day public spending from tax receipts by 2031-32, making the policy doubly important.
The centrepiece of this strategy is forcing more than 12million self-employed taxpayers to pay tax throughout the year from 2029 rather than in a single lump sum. The OBR forecasts this change alone will raise £1.6billion annually, with the timing of payments bringing revenue forward to help balance the books. However, the OBR highlighted that 'there is quite a lot of risk around the estimates' for additional revenue from compliance measures and tax debt reduction, according to Tom Josephs, who presented the forecasts to MPs. He noted that the area of HMRC collecting debts through hiring more staff and using new powers to recover money directly from bank accounts is 'definitely an area that we highlight as very uncertain'.
HM Revenue and Customs is recruiting 7,000 extra staff to tackle what the government estimates as a £59billion annual tax gap between theoretical and actual tax collection. However, experts have raised concerns about the feasibility of this approach. Mike Lewis, director of TaxWatch, a tax system scrutiny think-tank, warned that 'around 80 per cent of the extra staff are new recruits still in 18-month initial training' and noted that HMRC received 'the deepest capital spending cut of any Whitehall department' in last year's spending review, limiting investment in systems and technology.
The policy presents a practical challenge for business owners and sole traders, who face quarterly or monthly tax payments rather than annual ones. Ian Robotham, a partner at law firm Pinsent Masons, said the shift means 'HMRC is under sustained pressure to increase compliance yield', likely resulting in 'more targeted compliance interventions and more intensive investigations, which can be costly and time-consuming for businesses to manage'. The OBR also noted that previous efforts to close the tax gap had failed, adding to concerns about whether the new measures will succeed.
For UK businesses and self-employed workers, the changes mean greater administrative burden and cash flow pressure as tax payments shift from annual to more frequent throughout the year, while HMRC becomes more proactive in pursuing compliance.