Avoid costly tax mistakes
Draw on our money guidance team’s decades of tax expertise to steer clear of penalties and make the most of allowances. You get unlimited access to them via phone with a Which? Money subscription.
Find out moreCould your self-assessment tax bill soon be paid monthly?
The proposals could affect around 2.1 million of the UK's 12 million self-assessment taxpayers, according to HMRC
With a background in financial journalism across national titles, Ruby loves helping people take control of their money and specialises in pensions, tax, banking and benefits.
Some self-assessment taxpayers could soon pay their tax bills monthly rather than in a lump sum under new government plans.
Announced at the Autumn Budget 2025 and set to be introduced from April 2029, the proposed rules would require self-assessment taxpayers with an employment or private pension income to pay more of their tax liability through PAYE.
A new government consultation has been launched setting out how the changes could work in practice.
Here Which? explains what you need to know about who's affected and how your payments could change.
What has been proposed?
Self-assessment is used by HMRC to collect tax from individuals whose income is not fully taxed through PAYE (Pay As You Earn). This includes those who are self-employed, sole traders, landlords and those earning savings interest or investment income.
Currently, if you complete a self-assessment tax return, you report your income and pay the tax you owe for the previous tax year by 31 January. There is also the 'payment on account' deadline on 31 July, when some taxpayers pay 50% of their expected tax bill in advance of the following January's deadline.
The new proposals target people who file a tax return but also have a job or pension paid through PAYE, switching them from large lump sums to automatic monthly payments or to quarterly ones.
According to HMRC, roughly 2.1 million of the 12 million self-assessment taxpayers could be affected by the shake-up.
HMRC is also seeking views on lowering the current £1,000 threshold that determines whether taxpayers need to make payments on account.
- Find out more: how to fill in a self-assessment tax return
How will it work?
Under the proposals, from the 2029-30 tax year, taxpayers paid monthly through PAYE would clear their tax bill in two parts.
You would pay around 8.3% of your estimated tax bill each month through your wages or pension, with the initial amount based on your previous year's tax return.
If your final tax bill ends up being higher than what was collected monthly, you would pay the remaining balance by 31 January 2031 when you file your tax return. If you overpaid, HMRC would refund the difference after your tax return has been processed.
What your monthly payments could look like
Freelance income: If Sarah owed £1,200 on her extra freelance income on her 2028-29 tax return, HMRC would use that figure to set her initial monthly payments for 2029-30 at £100 per month (8.3% of £1,200), automatically deducted from her main job's payslip.
When she completes her actual 2029-30 tax return, if her true bill turns out to be £1,500 due to extra work, she would pay the remaining £300 balance by 31 January 2031. If her bill drops to £1,000, HMRC would refund her £200 overpayment after processing her tax return.
Pension income: If David has a private pension paid through PAYE as well as self-employed income, and his last tax return showed a £2,400 tax bill, HMRC would use that amount to calculate monthly deductions of £200 from his pension.
Throughout the 2029-30 tax year, his pension provider automatically deducts this £200 each month directly from his pension payout before it hits his bank account, totalling £2,400 paid in real time.
If his actual self-employed bill for 2029-30 ends up being £2,700 when he completes his return, he would then pay the remaining £300 balance by 31 January 2031. If his business income dropped and his final bill was only £2,000, HMRC would refund his £400 overpayment after processing his return.
- Find out more: online tax returns explained
What happens if you have fluctuating income?
HMRC is proposing several safeguards for taxpayers with seasonal, irregular or delayed income. These include:
- Being able to reduce future monthly deductions if your income falls during the year by updating your income estimate.
- Receiving an automatic and quick refund if you've overpaid once your annual tax return has been processed.
- Limiting additional PAYE deductions so they don't reduce take-home pay below legal limits.
- Considering more flexible payment arrangements for people with seasonal or irregular income, such as quarterly payments.
The tax office is also looking for ways to make the transition to the new system smoother for taxpayers who will owe tax for both the previous 2028-29 tax year and the new one.
This includes support such as allowing taxpayers to make voluntary payments before 2029, and spreading the older 2028-29 tax bill over a longer timeframe.
- Find out more: mortgages for self-employed buyers
Why is this being considered?
The reforms aim to help taxpayers manage their liabilities and reduce the risk of unpaid tax debt. According to HMRC, in January 2025, 1.1 million payments on account were missed.
It noted that around a quarter of the self-employed who missed the payments on account deadline this year paid within two months, while the other three-quarters became debt that HMRC needed to collect.
On the consultation, HMRC said: ‘Spreading tax payments more evenly through the year could help taxpayers avoid unexpected lump-sum bills and reduce the risk of falling into tax debt.
'We recognise that self-employed people and landlords can have fluctuating incomes, which is why we are consulting widely as we want to hear views on how potential reforms could work in practice.'
The consultation runs until 4 August 2026, and you can submit your response through the online form or by email to timelypayment@hmrc.gov.uk.
Is this different from Making Tax Digital? (MTD)
Yes. Making Tax Digital changes how some self-employed people and landlords keep records and report income to HMRC. These proposals would instead change when some self-assessment taxpayers pay their tax.
Making Tax Digital, introduced in April 2026, requires landlords and sole traders earning over £50,000 a year to use compatible software to keep tax records and submit tax data quarterly.
Those affected still only need to submit a tax return and pay any tax they owe by 31 January.
The threshold drops to £30,000 from next April, and to £20,000 from April 2028. Anyone earning under this level does not need to comply and will continue to submit self-assessment tax returns as normal.
Those who do will need to submit their first quarterly income and expenditure update by 7 August.
Recent HMRC data showed that 864,000 individuals and landlords should have registered for Making Tax Digital for income tax, but fewer than half have done so.
- Find out more: 8 tips for landlords filing their self-assessment tax return
