HMRC plans to end January tax bills for millions from 2029

The Government is consulting on plans to overhaul the Self Assessment system by collecting Income Tax much closer to the point people earn it, rather than allowing bills to build up over many months.

While ministers insist the proposals are not a tax rise, the changes would mean millions could see money leaving their bank account far more regularly than they do now.

The reforms, first announced at Budget 2025, are due to begin rolling out from April 2029.

Why is HMRC changing Self Assessment?

Under the current system, many people who file a Self Assessment return do not pay tax until months after they’ve earned the income.

Those with tax bills over £1,000 generally make two Payments on Account each year, due on 31 January and 31 July, before paying any remaining balance the following January.

HMRC argues this system no longer reflects how people manage their finances.

In the consultation document, officials say they want to “modernise the tax system” by ensuring tax is “paid closer to real time, reducing the likelihood of late payments or taxpayers falling into tax debt.”

The consultation adds that “around one-in-five ITSA tax bills are paid late”, while there can currently be “a delay of up to 22 months from when the initial taxable activity takes place and when the relevant tax is paid.”

Officials believe smaller, more regular payments would help people budget more effectively while reducing late payments.

Who will be affected?

The first phase of the reforms will affect around 2.1 million taxpayers who receive both PAYE income and income taxed through Self Assessment.

This includes employees who also earn money through:

• Self-employment
• Freelance work
• Property income
• Consulting
• Side businesses

Instead of making large lump-sum payments twice a year, these taxpayers would begin paying towards their expected Self Assessment bill automatically through their PAYE tax code every payday.

HMRC says payments would be “forecasted, based on past Self Assessment returns”, while taxpayers would still be able to update those forecasts if their income changes during the year.

Millions more could eventually pay monthly

The Government is also exploring whether the reforms should be extended to the estimated 9.5 million taxpayers who cannot pay through PAYE.

Officials are consulting on replacing today’s twice-yearly Payments on Account with monthly or quarterly instalments paid directly to HMRC.

At the end of each tax year, taxpayers would still submit a Self Assessment return, with any underpayment collected or overpayment refunded as happens now.

HMRC says it’s not a tax rise

The Government has been keen to stress that the proposals would not increase anyone’s tax bill.

Instead, they simply change when the money is paid.

The consultation states: “These proposed reforms will not increase the amount of tax due; instead, they bring the timing forward so that tax is paid closer to when the income is earned.”

Officials say the reforms are intended to “support taxpayers to manage their ITSA liabilities more effectively, reducing tax debt and improving compliance.”

Why some self-employed workers may be worried

Despite HMRC’s assurances, bringing tax payments forward could create cash flow pressures for many freelancers and small business owners.

Rather than keeping hold of income until January or July, taxpayers may have to start handing over money throughout the year.

The consultation acknowledges there will also be “an adjustment period” as taxpayers move from the existing payment timetable to the new one.

During the transition, many could find themselves paying liabilities under both the old and new systems before the reforms fully bed in.

HMRC says it is considering ways to ease the switch, including allowing some existing liabilities to be spread over a longer period.

What about people whose income changes?

One of the biggest concerns is how the system would work for people whose earnings fluctuate throughout the year.

The Government admits there are “challenges of more timely payment for some ITSA taxpayers”, particularly those with “seasonal or irregular income patterns.”

Officials say these circumstances will be “carefully considered” when designing the final system, with taxpayers able to update forecasts if their income rises or falls.

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What happens next?

The consultation closes on August 4 2026, with the Government expected to publish its response later this year.

If ministers proceed with the plans, the first changes will begin from April 2029, marking one of the biggest overhauls of the Self Assessment payment system in decades.

For millions of taxpayers, it could signal the beginning of the end of the traditional January tax bill – replaced instead by smaller, more frequent payments throughout the year.