HM Revenue and Customs closed its consultation on moving income tax payments closer to payday on 4 August 2026, confirming plans that could see hundreds of thousands of Self Assessment taxpayers paying tax through payroll deductions or more frequent instalments instead of the current January and July lump sums. The consultation, titled "Timely Payments in Income Tax Self Assessment", ran for six weeks from 23 June 2026 and followed the government's Budget 2025 announcement of changes to payment timings for people with PAYE income.
Under the proposal, taxpayers who also receive PAYE income — a salaried employee with rental income, for instance — would have part of their Income Tax Self Assessment (ITSA) liability collected through their payslip on each payday, rather than as a single bill months after the tax year ends. HMRC has floated a cap of 50% of PAYE income per pay period, with the deduction based on a forecast drawn from the taxpayer's last filed return and adjustable as new information comes in.
Payments on account face an overhaul too
For ITSA taxpayers without PAYE income — sole traders, partners and those receiving carried interest, among others — HMRC wants to replace the existing payments on account system with monthly or quarterly in-year instalments. The department is also weighing whether to cut the £1,000 threshold below which taxpayers are currently exempt from payments on account altogether, though no replacement figure has been set. New traders would feel the change differently: HMRC's own figures show a gap of up to 22 months can currently pass between income being earned and the tax on it actually being paid.
The numbers behind the push are considerable. Self Assessment taxpayers contributed £48 billion in tax during 2024/25, and HMRC says roughly one in five ITSA payments arrive late under the present system — a proportion the department wants to bring down by tying collection more closely to when income is actually earned. Whether monthly payroll deductions or quarterly instalments, the goal stated throughout the consultation document is the same: close the gap between earning and paying.
Part of a wider digitisation push
Three days after the consultation closed, the first Making Tax Digital for Income Tax quarterly deadline arrived on 7 August 2026, applying to more than 864,000 sole traders and landlords with qualifying income above £50,000. HMRC has been explicit that the two reforms are connected: quarterly MTD submissions are one of the data sources the department is examining as a way to keep in-year payment forecasts accurate, rather than relying solely on the previous year's Self Assessment return.
No change before 2029
Nothing changes for taxpayers filing returns this year or next. HMRC plans to review consultation responses and publish its formal reply in autumn 2026, ahead of the Chancellor's Budget on 28 October 2026. Any legislation would follow in a Finance Bill, with implementation not scheduled before April 2029. The 2029/30 tax year has been marked out as a transition period, during which liabilities under the old payment schedule and the new one would run side by side; HMRC has floated smoothing options such as spreading an outstanding July payment on account evenly over four, six or twelve months to soften the overlap.
Employers and payroll providers would carry much of the administrative weight if the PAYE route goes ahead, facing more frequent tax code changes and, for some, a shift from quarterly to monthly PAYE remittance. Tax agents would take on the separate task of keeping client income forecasts current between filing seasons, particularly for newly registered or returning ITSA taxpayers who lack a reliable filing history for HMRC to forecast from.