What Are The Proposed Reforms?
As part of HMRC’s Tax Update 2026 and following announcements from Budget 2025, the government is consulting on reforms to shift more Self Assessment liabilities into PAYE, especially if you also receive PAYE income. (gov.uk)
Currently, Self Assessment taxpayers with PAYE income often owe substantial balancing payments upon filing, plus Payments on Account in two instalments. The consultation seeks views on moving more payments earlier, in-year, to reduce surprises and tax debt. (gov.uk)
Who Will Be Affected & When?
- The reforms would begin to apply for taxpayers with both Self Assessment and PAYE income from April 2029, as per current government proposals. (gov.uk)
- The Payments on Account system for sole Self Assessment income customers may also be revised or replaced. The consultation seeks input. (gov.uk)
Why the Change?
- Reduce large tax-debt spikes: more regular payments means less risk of underpayment.
- Fairer cash flow spread: avoids daunting bills in January for those who could afford to spread cost.
- Better alignment of payments with when income is earned.
Practical Planning Tips Before Changes Arrive
- Review your income flow across months; estimate earnings from PAYE and self-employment to forecast total tax due.
- Consider increasing your PAYE tax code in advance if you expect high unauthorised Self Assessment liability. Seek advice from HMRC or employment advisers.
- Track Payments on Account deadlines if applicable (usually 31 January and 31 July) to ensure funds are available.
- Keep updated on the consultation response release; final legislation likely through Finance Bill 2026-27.
Example Scenario
Tom works part-time employed with PAYE and has rental income. Currently, he settles most tax post-year via Self Assessment, alongside two Payments on Account. If reforms pass:
- Some or all of his rental income tax may be collected via PAYE through revised code changes or PAYE deductions during year.
- Amount he pays in January could be significantly lower.
- He’ll need to plan monthly budgets differently—and may need advice on adjusting PAYE code sooner rather than later.
What You Should Do Now
- Identify whether your income mix (PAYE + Self Assessment) makes you a likely candidate.
- Monitor HMRC consultation updates—responses closed in August 2026. (gov.uk)
- Engage with tax advisers to structure income and liabilities where possible to reduce risk.
Key Takeaways
- Reforms designed to smooth cash flows and reduce surprise tax bills.
- Earliest application is April 2029 for those with PAYE income.
- Those with only Self Assessment income also under review.
- Use the intervening years to plan, adjust, and forecast more proactively.
Effective planning during the transition period can reduce stress when reforms take effect, ensure you have liquidity when needed, and minimise repayment or penalty surprises.