The Government is currently considering changing the frequency of Income Tax Self Assessment (ITSA) payments, according to a consultation paper.
Following on from the recommendations of the Autumn Budget 2025, the latest Tax Update indicated that ITSA payments may move to a more regular, in-year footing.
It is beneficial for those likely to be affected to understand the considerations and how it may affect the preparation of Self Assessment tax returns.
How might tax payments change in the future?
April 2029 may see taxpayers with sufficient PAYE income make ITSA payments through PAYE each payday.
This is set to be based on forecasted liability, which is generated from the last filed tax return and divided into equal payments across the year.
If more information becomes relevant, it will be possible for taxpayers to update the forecast and see the payments adapt accordingly.
A maximum of 50 per cent of PAYE income will be collected through PAYE in any given pay period.
This cap is something that is being specifically questioned in the ongoing consultation as the Government seeks to understand whether the threshold needs to be more flexible to meet the needs of different groups.
How will the proposals affect employers?
While the individual taxpayer is likely to face the most changes, employers will need to take note of how PAYE will be affected.
This system will likely see tax codes change with greater frequency than may typically be expected and employers who operate a quarterly PAYE system may need to swap to monthly payments as amounts collected increase.
The full extent of the impact on employers is currently being determined as part of the consultation process, with the Government welcoming insights on how to best support employers.
Payments on Account to face similar changes
April 2029 may also see a notable change to Payments on Account (POAs) as these could be changed to be quarterly or monthly rather than the twice-annual limit that currently exists.
Changing the frequency of POAs will bring them forward so that they fall within the same tax year as the income to which they relate and will likely align with the information collected through Making Tax Digital (MTD).
As with the PAYE system, the POAs will also be forecast from previous Self Assessment returns with the ability to update the forecasts and payment amounts as needed.
There will remain a need to report actual liability and settle any balancing payments or repayments when the next return is completed.
Should the POA cease to reflect the liability of a taxpayer, they are at liberty to contact HMRC.
The consultation is also determining the utilisation of alternative payment plans.
Why is the tax system being changed?
The current system is set up in a way that can result in a 22-month delay between a person earning income and paying tax on it.
A delay of this magnitude can result in unexpectedly high tax bills jeopardising the financial stability of taxpayers who may have lost sight of their liabilities.
As around one in five ITSA tax bills are currently paid late, there is hope that spreading payments more evenly across the tax year will help with budgeting as the bills fall closer to when income is earned.
The amount of tax paid should not be impacted as the focus is centred solely on when tax is paid.
What is likely to happen next?
As the changes are implemented, a transition year will see payments for the previous tax year continue alongside the new in-year payments.
The consultation closed on 4 August 2026 and the Government response is expected to be issued in the autumn.
Legislation should follow shortly thereafter in order for the changes to take effect in April 2029.
Our team can support you with any potential changes to ITSA payments, so get in touch.
