Overview of the proposed change to Income Tax Self Assessment (ITSA)
In the UK’s 2026 tax update published 23 June 2026, the government proposed reforms aimed to shift Self-Assessment tax payments to more regular, in-year payments via PAYE for those with PAYE income. (gov.uk) The goal is to reduce the frequency of large lump-sum payments and ease cash flow burdens. Other taxpayers may see changes to the Payments on Account system. (gov.uk)
Who is affected & why this matters
- Taxpayers earning income through both PAYE and Self-Assessment. Those with significant non-PAYE income currently make a single large payment after the tax year ends.
- Self-Assessment users without PAYE income may still face reforms to the Payments on Account.
This is important because:
- Spread-out payments mean smaller, more predictable cash outflows.
- Avoidance of surprise large bills after April 5.
- Potential interest or penalties if new payment obligations are not met.
Practical tax planning strategies
- Forecast your annual tax early: Combine your PAYE income and expected self-employment or other income to estimate your total liability.
- Discuss with employer for PAYE adjustments: If you expect extra income, asking your employer to adjust PAYE codes may help spread the burden.
- Keep tight cash reserves: Prepare for earlier or phased payments starting April 2029.
- Engage with HMRC’s consultations: There’s an ongoing consultation. Public submissions may influence thresholds, timing, and methods.
Example scenario
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Scenario: Sarah works in a salaried role (PAYE) part-time and runs a small design business on the side. She earns £40,000 PAYE income and £15,000 through her business. Under the reform, from April 2029, Sarah may need to pay into PAYE some forecasted Self Assessment liability rather than a large payment in January.
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Benefit: she avoids £5,000 bill in one go and spreads payments during the year.
Legislative update & timelines
- Draft legislation published in Finance Bill 2026-27 on 13 July 2026 includes proposals covering this reform. (gov.uk)
- Reforms are planned for April 2029 for those combining PAYE and Self Assessment. (gov.uk)
Action points for taxpayers now
- Start tracking your non-PAYE income and expenses now so you have clear forecasts.
- Speak to advisors or use tax software to model your cash flows under the proposed regime.
- Budget for more frequent payments.
- Stay alert for the final Finance Bill wording and guidance from HMRC (expected likely in late 2026 or early 2027).
Summary
These proposed changes aim to bring UK Self-Assessment into greater alignment with PAYE payments, reducing stress from large, end-of-year tax bills. Individuals with mixed income streams should plan ahead now to avoid last-minute surprises.