Under the current Self Assessment system, some taxpayers are required to make Payments on Account towards their following year’s tax bill.

Generally, this applies where:

• your previous year’s Self Assessment tax and National Insurance liability were more than £1,000; and
• less than 80% of your tax liability was collected at source, for example through PAYE.

The Payments on Account are normally calculated as 50% of the previous year’s relevant tax liability, with one payment due on 31 January and another on 31 July.

Sarah’s 31 January payment can effectively contain two different things:

1. the balancing payment for the year just finished; and
2. the first Payment on Account towards the following year.

For someone experiencing the system for the first time, this can result in a very large tax bill.

HMRC itself refers to this as the potential for “bill shock”.

Proposal 1

Paying your Self Assessment tax through PAYE

This is the part of the reform that has actually been announced.

From April 2029, taxpayers with sufficient PAYE income may have their forecast Self-assessment liability collected through their salary or pension. Instead of waiting until January and July to make large payments directly to HMRC, the tax would be collected in smaller amounts throughout the year.

HMRC currently estimates that around 2.1 million people could fall within the scope of this change.

Imagine James is employed and earns £50,000 a year.

He also has a small property business, which generates an additional taxable income of £10,000.

Under the proposed system

Assuming he has sufficient PAYE income, HMRC could instead calculate a forecast of his Self Assessment liability and collect that tax through his PAYE code.

So rather than James putting aside, say, several thousand pounds for a January tax bill, a proportion could be collected from his salary every time he is paid.

In simple terms:

Proposed system

Earn income → tax is collected throughout the year → complete tax return → reconcile the actual liability

The total tax should ultimately be the same.

The only difference is the timing of when the money leaves your bank account.

But what if your income changes?

This is one of the biggest issues HMRC is considering.

For example, imagine James’s property income falls significantly!

If HMRC simply based his payments on his previous tax return, he could end up having too much tax collected through PAYE.

The proposal therefore allows taxpayers to update their forecast where they know their income is going to be significantly higher or lower than expected.

But.. HMRC has said it is considering an online process for taxpayers to update their forecasts, with the intention that payments can then be adjusted.

This will be particularly important for people whose income isn’t consistent!

 Seasonal businesses could be particularly interesting

Imagine Emma runs a business selling Christmas products, which means her income isn’t evenly spread throughout the year.

She might make very little during the spring and summer but generate a significant proportion of her annual income during October, November and December!

A system designed around regular payments could create difficulties if it assumes that income arrives evenly throughout the year.

HMRC has specifically acknowledged that seasonal and irregular income patterns need to be considered when designing the new system.

So, this is one of the reasons the consultation is important.

The Government hasn’t simply announced every detail and switched the system on. It is asking taxpayers, accountants, payroll professionals and other stakeholders how the system should work.

Proposal 2

Could Payments on Account themselves change?

This is where things get particularly interesting!

For people who don’t have sufficient PAYE income, HMRC is also considering whether the current two-payment system should be replaced with something more frequent.

At the moment, around 3 million Self Assessment taxpayers make Payments on Account.

The current system is:

31 January = 50%

31 July = 50%

HMRC is considering whether payments could instead be spread more evenly throughout the year.

However, and this is important:

No decision has yet been made to change the direct Payments on Account system!

The June 2026 consultation is asking for views on whether and how this could be done.

A future system could potentially spread payments across more regular instalments.

For example, £500 per month would produce the same £6,000 annual payment.

But, this is only an illustration.

HMRC has not announced that Payments on Account will become monthly payments of this kind.

The consultation is specifically seeking views on how more frequent payments could work.

Why does HMRC want to do this?

There are several reasons:

To help people budget

There is a psychological difference between:

“I need to find £6,000 by 31 January”

and:

“£500 is being put aside each month.”

The amount of tax is the same.

But the second option can be much easier for some people to manage.

What should taxpayers do now?

At the moment, there is no need to change your tax payment arrangements because of these proposals.

However, there are some useful things you can do.

 Don’t ignore your Payments on Account

They aren’t optional simply because you don’t like the size of the bill!

If you genuinely expect your tax liability to fall, speak to us about whether reducing your Payments on Account is appropriate.

Get into the habit of putting tax aside regularly

Even if HMRC doesn’t require monthly payments today, creating your own monthly “tax pot”, which can make January and July much less painful.

Keep your records up to date

The more up-to-date your accounting records are, the easier it is to forecast your likely tax liability.

This is going to become increasingly important as HMRC moves towards more timely tax payments.

Don’t confuse the announcement with the proposal

The PAYE changes from April 2029 have been announced. The wider reform of direct Payments on Account is still being considered and the detailed rules are therefore not final yet.

What happens next?

HMRC’s consultation on Timely Payments in Income Tax Self Assessment ran from 23 June to 4 August 2026.

The Government says it intends to publish a summary of responses in Autumn 2026, with any necessary legislation to be introduced ahead of the planned April 2029 implementation.

So there is still plenty of detail to be worked out.

For taxpayers, the most important message for now is simple:

Don’t panic, but don’t ignore it either.

The way Self Assessment tax is paid is moving towards a more “real-time” model.

For some taxpayers, that could mean saying goodbye to the traditional January and July Payments on Account and instead having tax collected throughout the year.

For others, HMRC may eventually introduce more frequent direct Payments on Account.

Either way, the direction of travel is clear:

HMRC wants taxpayers to pay their tax closer to the point at which they earn the income.

And for accountants, that means tax forecasting, cash-flow planning and keeping clients’ records up to date are likely to become even more important.

So, what happens to Payments on Account?

This is the bit to keep an eye on.

If you have PAYE income from April 2029 and if you meet the relevant conditions, your Self Assessment tax is expected to be collected through PAYE during the year.

If you don’t have sufficient PAYE income HMRC is considering whether the existing two Payments on Account should become more frequent. But nothing has been decided yet.

If you are already making Payments on Account there is no immediate change and for now, the existing rules continue to apply.

If your circumstances have changed and you expect your tax liability to be lower, you can still apply to reduce your Payments on Account under the existing rules.

The obvious problem that has concerned us

What happens when your income isn’t predictable?

This is one of the biggest challenges with moving towards more timely payments.

A self-employed person might have:

• a fantastic year followed by a poor year;
• a large one-off contract;
• seasonal income;
• substantial expenses in one year;
• fluctuating property income; or
• income that is earned before the cash is actually received.

If HMRC collects tax based on a forecast and that forecast is wrong, taxpayers could find themselves paying too much or too little during the year.

That means the ability to update forecasts and adjust payments will be incredibly important.

HMRC has recognised this issue and is specifically seeking views on safeguards for taxpayers with fluctuating or irregular income.

Further reading

HMRC’s consultation:Timely Payments in Income Tax Self Assessment

HMRC’s factsheet: Timely payments in Income Tax Self Assessment factsheet

Current HMRC guidance on Payments on Account: Understand your Self Assessment tax bill – Payments on Account