Nimesh Patel, Tax Partner at leading London accountancy firm, Grunberg, is warning that millions of Income Tax Self Assessment (ITSA) taxpayers could be required to pay their tax bill in regular instalments throughout the year, rather than largely after it, under new proposals.
The consultation, published as part of Tax Update 2026, sets out two related changes that would apply from April 2029.
The first covers ITSA taxpayers with a PAYE source of income, such as employment or a private pension.
These taxpayers would have more of their forecast ITSA liability collected in-year through their tax code, in 12 monthly instalments worth 8.3 per cent each, with a balancing payment due the following January.
HMRC estimates around 2.1 million of the 12 million people currently in ITSA would fall within scope.
The second covers taxpayers who make payments on account, where the government is exploring a move from the current twice-yearly payments to monthly or quarterly instalments.
A £1,000 threshold that currently determines who needs to make payments on account could also be reduced, pulling more taxpayers into the system.
The Government’s stated aim is to reduce the number of people falling into tax debt, noting that around one in five ITSA bills are currently paid late.
Nimesh said the changes would land very differently depending on a client’s circumstances.
“For those who have been paying on time and are on top of their finances, these changes will not be welcome. They will affect cash flow, meaning people will need to readjust their finances when they transition from the current payment system to the new one,” he said.
“Clients with fluctuating income, such as self-employed individuals and those taking differing amounts of dividends from their limited company each year, are likely to feel the impact most.
“When tax payments fall due, their accounts for the previous year will not yet have been prepared.
“The Government’s intention is that payments will be based on the last tax return filed, but given current filing deadlines, that could mean using figures for a tax year that ended over a year ago. This will make forecasting payments on account very difficult.”
Nimesh noted that clients with more predictable income streams, such as rental income, may be less affected, since they will have a clearer sense of their approximate income for the tax year when payments fall due.
He also questioned whether the proposals sit comfortably with earlier Government reassurances about Making Tax Digital.
“Despite what has been said by the Government, there was always a fear that MTD would lead to more regular tax payments, bringing the UK tax system in line with other countries that have already implemented this,” he said.
Not all the impact would be negative, he added. Earlier, smaller payments could make budgeting easier for some clients.
“It could help clients who find it hard to put money aside for tax. By making more regular payments, they are less likely to fall behind and the balancing payment becomes more manageable.
“It may also help clients who might otherwise be tempted to spend that money before tax is due,” he said.
Nimesh said the proposals would also affect how tax planning conversations are conducted.
“Clients should be working with their accountant to look at forecasted payments on account ahead of time and see if any reductions can be made,” he added.
“The timing of tax payments will need to be discussed more often, so clients understand the full picture when it comes to income tax planning.”
He urged ITSA taxpayers to think about preparing now, even though the proposals have not been confirmed.
“Taxpayers should get into the habit of having their tax returns prepared earlier, so they know their upcoming tax payments sooner,” explained Nimesh.
“This will help with the transition from the old system to the new one, as early preparation makes it easier to work out whether payments on account are sufficient or need amending.
“They should also consider whether they can cope with making payments on account earlier, or having additional amounts taken from their salary each month under PAYE.
“If that looks like it could be a problem, they should review their personal finances now and make adjustments ahead of the new system coming in.”
The consultation closes on 4 August 2026 and nothing has yet been confirmed, but Grunberg is happy to help those looking to improve their record keeping in advance of the changes.
