End in sight for extra earnings tax 'holiday'

Ministers are to end a perk enjoyed by thousands of taxpayers who earn extra income from freelance work or letting second homes.

From April, new rules will allow the Inland Revenue to demand instant payment of taxes owed, ending a " holiday" of up to 16 months for some late payers.

In future, the taxman will be allowed to claw in tax on outside earnings using the Pay As Your Earn system through company payrolls. PAYE rates will rise to up to 50 per cent of salary to speed up collection.

About three million taxpayers who have outside earnings on top of a regular salary could be affected. The Tories criticised the move, saying it had not been adequately publicised and could cause havoc for honest payers.