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- A question of time: how often should freelancers pay their taxes?
A question of time: how often should freelancers pay their taxes?
- 19 Jul 2021
- Chloe Jepps
- Joshua Toovey
- Nearly two-thirds of freelancers (63%) oppose the idea of paying Corporation Tax more frequently
- Over half of freelancers (57%) oppose the idea of paying Income Tax more frequently
- Nearly three quarters of freelancers (72%) would struggle with increased admin burden if they had to pay income tax more frequently
- 2 out of 5 freelancers (40%) said paying taxes more frequently would cause cashflow problems
- Over two-thirds of freelancers (69%) oppose a move to in-year Income Tax calculation while three-quarters (76%) oppose this for Corporation Tax.
Overall, freelancers are largely opposed to increasing the frequency of either Income or Corporation Tax payments. They also even more strongly oppose the idea of moving to in-year instead of retrospective calculations for either tax.
Almost two-thirds of freelancers (63%) were either quite concerned or very concerned by the idea of increasing the frequency of Corporation Tax payments. Over half (57%) felt the same about Income Tax.
Some freelancers could see advantages to more frequent tax payments. Almost a third (32%) said they believed paying tax more frequently would be less stressful, while another 30 per cent thought it would help with budgeting throughout the year. A fifth (20%) also thought it would reduce the risk of incurring HMRC penalties and interest because of missing deadlines.
Overall, however, the proportion who saw advantages was far outweighed by those who feared it would cause serious challenges for them. Just one in ten (12%) did not think increasing the frequency of tax payments would entail any challenges for them. Meanwhile, nearly three-quarters (72%) believed paying tax more frequently would increase the administrative/time burden involved.
Freelancers also worried that increasing the frequency of tax payments could leave them out of pocket. Two out of five (40%) believed it would cause difficulties with their cashflow, while another two-fifths (39%) said they would be less able to cover unexpected costs and a third (34%) were concerned they would be more at risk of incurring HMRC/interest charges.
A quarter (24%) were concerned they would not be able to accrue interest on the funds due for tax (which they can currently invest in their business). Overall, while three-quarters of freelancers (75%) said they had money set aside for their tax payments, a fifth (19%) said they were using the money to cover their business expenses, approximately one in six (17%) had it invested in their business and one in ten (11%) were using it to cover personal bills and expenses.
Freelancers were also overwhelmingly opposed to the idea of tax being calculated in-year instead of retrospectively. Over two-thirds (69%) were either fairly or very concerned about the idea of doing this for Income Tax, which rose to over three-quarters (76%) for Corporation Tax.Read the full report here
Meet the authors
Head of Research
Policy and research officerJoshua Toovey is the policy and research officer at IPSE.
- Chloe Jepps
- 16 Mar 2021