Millions of British workers are set to be affected by a major shake-up to income tax rules, as HM Revenue & Customs (HMRC) confirms significant changes to how earnings are reported.
What's Changing in the UK Tax System?
The tax authority has announced it will merge the Pay As You Earn (PAYE) and self-assessment systems into a single, streamlined process. This overhaul represents the biggest change to income tax administration in decades.
Key Impacts for Employees and Self-Employed
- Simplified reporting: Workers will no longer need to file separate tax returns if they have both employment and self-employment income
- Real-time updates: Tax codes will adjust automatically as earnings change throughout the year
- Reduced paperwork: The new system aims to eliminate common errors and unnecessary form-filling
When Will These Changes Take Effect?
The transition to the new system will begin in April 2025, with full implementation expected by 2027. HMRC insists the phased approach will allow businesses and individuals time to adapt.
"This modernisation will make tax simpler for millions," said an HMRC spokesperson. "By bringing these systems together, we're reducing administrative burdens while improving accuracy."
Who Will Be Most Affected?
The changes will particularly impact:
- Freelancers with multiple income streams
- Small business owners
- Those with side hustles alongside regular employment
- Higher-rate taxpayers with complex financial arrangements
Financial experts advise workers to review their current tax arrangements ahead of the changes to ensure a smooth transition.
