What’s Changing?
From April 2029, taxpayers who receive income through Pay As You Earn (PAYE)—such as salaries or pensions—and also file a Self-Assessment tax return will be required to pay much of their Self-Assessment liability during the tax year via their PAYE code. Currently, such taxpayers often wait up to 22 months after income is earned before paying all their Self-Assessment tax. (gov.uk)
The policy was announced in HMRC’s Fiscal Events 2026 package under Tax Update 2026, as part of broader reforms aimed at “simplification, modernisation and fairness” in UK tax administration. (gov.uk)
Who Will Be Affected?
- People with both PAYE income and Self-Assessment-only income—e.g. someone employed part-time + freelance work.
- Those whose tax liabilities don’t fall neatly into the existing Payments on Account system.
- Importantly, no one will pay more tax in total; the reforms change the timing, not the amount. (gov.uk)
Why the Change?
- To reduce large, unexpected bills that many find hard to budget. Around 1.1 million Payments on Account were missed in January 2025, and 75% of those led to tax debt. (gov.uk)
- To bring the UK in line with other countries where tax is collected more evenly throughout the year, reducing accrual delays. (gov.uk)
Key Features & Safeguards
| Feature | Details |
|---|---|
| Forecasting | HMRC will use your most recent tax return to estimate the Self-Assessment tax due, then add it into your PAYE code. |
| Flexibility | If your income is likely to differ materially, you’ll have options to make in-year forecasts or payments to adjust. |
| Transition support | HMRC will provide guidance, etc., including for taxpayers with complex or fluctuating incomes. (gov.uk) |
Practical Steps You Should Take Now
- Review your last Self-Assessment: Understand how much of your liability could be folded into your PAYE code.
- Track your income sources: Keep solid records so your estimates will be accurate and avoid surprises.
- Forecast ahead: If you expect income to be higher or lower, plan accordingly; options to submit estimates will be important.
- Use HMRC guidance early: HMRC is consulting this year; responses and draft guidance will help frame what’s allowed and expected. (gov.uk)
Implications for Tax Planning
- You may want to adjust withholdings, especially if you have seasonal freelancing or variable income.
- Investments that generate irregular income (dividends, capital gains) need forwarding planning.
- Monitor penalty exposure if you fail to forecast accurately or miss payments. The system is intended to be more forgiving, but accuracy will still matter.
Example: Sarah works full-time under PAYE and does freelance graphic design. Last year, she owed £4,000 in Self-Assessment tax. Under the new rules, HMRC may estimate that portion and spread it across her PAYE code starting in the current tax year—perhaps adding £80 to her monthly PAYE deductions—so that by April 2029 she has effectively paid most of it already.
Takeaway
While you won’t be paying more tax overall, you will be paying sooner—frequently through your monthly PAYE deductions. Start gathering records, tracking all income, and staying alert for guidance. Being proactive will help you avoid cashflow surprises.