HMRC’s new ‘timely payments’ consultation could mark the beginning of the end for the familiar January and July Self Assessment payments on account.  

HMRC’s timely payments consultation – what’s happening?

In the Budget 2025 the government announced plans to change when Income Tax Self Assessment liabilities are paid, aiming to bring tax payments closer to when income is earned rather than months after the end of the tax year. 

On 23rd June 2026 HMRC opened the ‘Timely Payments in income tax Self Assessment’ consultation, seeking views on how to implement more frequent, in‑year payments for Self Assessment taxpayers, including those with PAYE income and those whose income is not taxed at source. 

The consultation focuses on timing, not on increasing tax bills; the intention being that the overall tax due remains the same, but is spread differently across the year. 

As with previous major changes (such as Making Tax Digital), HMRC is asking for feedback from taxpayers, agents and representative bodies before finalising the detail. The consultation is open until 4th August 2026. 

From April 2029, HMRC is considering collecting Self Assessment liabilities closer to ‘in real time’, either through PAYE tax codes where possible or via more frequent direct payments (monthly or quarterly) for those outside PAYE. 

This could significantly reduce the role of the current payments on account system, which relies on large lump sums in January and July based on the prior year’s tax position. 

How payments on account currently work 

Under the existing Self Assessment rules, many taxpayers must make two advance payments towards their next tax bill, known as payments on account. 

These fall due on 31st January and 31st July each year, and each instalment is normally half of the previous year’s Income Tax and Class 4 National Insurance liability, with a ‘balancing payment’ the following 31st January if the current year’s bill is higher. 

Payments on account generally apply if your last Self Assessment bill was more than £1,000 and less than 80% of the tax was collected through PAYE or other deductions at source.

For many sole traders, landlords and company directors, this can mean substantial January and July payments that often bear little resemblance to their current income, particularly if profits have fallen or are seasonal. 

HMRC says it recognises that these lump sums can cause cash‑flow pressure, which is one of the reasons why options such as Budget Payment Plans and Time to Pay arrangements exist, to help spread the cost.

 The timely payments consultation goes further, looking at whether the whole structure of payments on account should be replaced by a more regular, in‑year system. 

What is HMRC proposing from April 2029?

The consultation outlines different potential approaches, depending on a taxpayer’s mix of income. 

• Taxpayers with sufficient PAYE income
  From April 2029, HMRC proposes that Self Assessment liabilities for many taxpayers with PAYE income would be collected through their tax codes, so extra tax is deducted from salary or pension during the year. 
  This could apply where someone still needs to file a Self Assessment tax return because of additional untaxed income (for example, rental profits or self‑employment), but has enough PAYE income for HMRC to recover their overall liability via regular payroll deductions. 
  
• Taxpayers whose income is not mainly taxed at source
  For sole traders, partners and landlords with little or no PAYE income, HMRC is exploring more frequent direct payments, such as monthly or quarterly instalments towards their Self Assessment bill. 
  These would be based on forecasts derived from recent returns and updated during the year as circumstances change, rather than on a fixed percentage of the previous year’s bill as under payments on account. 

The consultation recognises that using forecasts will mean more tax code changes and more questions from employees about changes in take‑home pay, as well as a need for clear communication and robust digital systems. 

It also accepts that implementation will be complex, particularly around transitional years, and so any final design will need safeguards to prevent taxpayers paying twice for the same period. 

So – is this the end of payments on account?

HMRC says that Payments on accounts have not been abolished, with the consultation is about how to move to more timely payments from April 2029, and whether the existing January / July payments pattern can or should be retained in some form for particular groups. 

However, the direction of travel is clear: HMRC wants tax to be paid closer to receipt of the related income, in smaller amounts during the year rather than via large lump sums after the year‑end.

If the proposals proceed roughly as outlined, the familiar payments on account regime would be replaced or significantly reduced, especially for taxpayers with enough PAYE income for HMRC to use their tax code. 

For other Self Assessment taxpayers, regular monthly or quarterly payments based on up‑to‑date forecasts could take the place of the old advance instalments, meaning that January and July would no longer be the main focus of their tax payments.

 In that sense, this consultation does look like the beginning of the end for the current payments on account system, even though the practical detail and timescales are still subject to further decision and legislation. 

What does this mean for your cash flow?

For some taxpayers, paying tax through PAYE or more regular instalments could make budgeting easier, by smoothing the cost across the year and avoiding large January and July bills.

For others, particularly those with fluctuating income or seasonal profits, a forecast‑based system might feel less predictable, especially if estimates are updated frequently and payments vary month to month. 

HMRC says it acknowledges that taxpayers will need ways to update their forecasts when their income changes, and that good digital records and timely returns will become even more important. 

It also highlights existing options such as Budget Payment Plans and Time to Pay arrangements, which already allow many taxpayers to spread the cost of their Self Assessment liabilities into smaller, regular payments. 

The key challenge will be the transition: in the lead‑up to April 2029, some taxpayers may find themselves dealing with the old payments on account timetable and new in‑year payment expectations at the same time.

Careful planning alongside clear messaging from HMRC will be essential to avoid cash‑flow shocks and to prevent taxpayers inadvertently paying more than they need to during the changeover. Given the recent debacle over Making Tax Digital, this is likely to be a challenge for HMRC!

What should taxpayers do now?

For the moment, nothing has changed around the current Self Assessment payment on account deadlines: 31st January and 31st July remain the key payment dates where payments on account apply.

Taxpayers can continue to file returns and make any applicable payments on account and should plan for these instalments in their cash‑flow forecasts. 

Looking ahead, it’s sensible to assume that tax will move towards more regular, in‑year payments, so accurate bookkeeping and timely reporting will only become more important.

Anyone likely to be affected, including sole traders, landlords, partners and directors with mixed PAYE and Self Assessment income, may want to start thinking about how more frequent payments could affect their cash flow and budgeting. 

Have your say!

HMRC’s consultation is open until 4th August 2026. This is an opportunity for taxpayers and advisers to share practical concerns and suggestions, particularly around how any new system should handle fluctuating income and transitional years.

You can find HMRC’s consultation, and the online response form, by searching for ‘Timely Payments in income tax Self Assessment’ on GOV.UK or by using this link. 

We will of course keep you up to date as the consultation findings are announced, and as future guidance is announced. If you have any concerns or queries around your Personal Tax affairs of liabilities in the meantime, please get in touch.