A new consultation paper from the Government has set out how Income Tax Self Assessment (ITSA) payments could move to a more regular, ‘in-year’ footing.
The new proposals follow on from recommendations made in the Autumn Budget 2025.
How could tax payments change in future?
From April 2029, taxpayers with sufficient PAYE income will be required to make ITSA payments through PAYE each payday, based on their forecasted ITSA liability.
The forecast will be based on the taxpayer’s last filed tax return and divided into equal payments across the year.
Taxpayers will be able to update their forecast using more recent information, with payments adjusted accordingly.
It is proposed that the amount collected through PAYE in any pay period would be capped at 50 per cent of PAYE income.
The consultation asks whether this threshold needs more flexibility for certain groups.
Impact on employers
Employers collect PAYE, so this change will create extra work. Tax codes are likely to change more frequently and some employers currently paying PAYE quarterly may need to switch to monthly payments as amounts collected increase.
Reform of payments on account
From April 2029, the Government may increase the frequency of Payments on Account (POAs) for those subject to Self Assessment outside of PAYE, potentially making them quarterly or monthly.
This would bring payments forward so they fall within the same tax year as the income they relate to. It is also likely that payments will rely on information provided via Making Tax Digital.
These direct ITSA POAs would be forecast from past Self Assessment returns, with taxpayers able to update their forecast if needed.
The actual liability would still need to be reported and balancing payments or repayments settled when the next return is completed.
Taxpayers will still be able to contact HMRC if their POA no longer reflects their liability and a wider use of payment plans is being considered.
Why is the change happening?
Under the current system, there can be a delay of up to 22 months between someone earning income and paying tax on it.
This can lead to unexpectedly high tax bills, sometimes referred to as bill shock, for some taxpayers.
Around one in five ITSA tax bills are currently paid late. Spreading payments more evenly across the year, closer to when the income is earned, should make budgeting easier and reduce the risk of falling into tax debt.
The reforms will not affect how much tax is owed, only when it is paid.
What to look out for
There will also be a transitional year, where payments for the previous tax year continue alongside the new in-year payments.
The consultation on the proposed changes closed on 4 August 2026. A Government response to the consultation is expected in autumn 2026 and legislation to follow ahead of the April 2029 start date.
If you would like advice on the proposed changes to ITSA payments, please get in touch with our team.
