HMRC Self Assessment Shake-Up — Smaller, More Frequent Tax Payments from April 2029
Big news for the self-employed: HMRC is overhauling how Self Assessment tax is paid. From April 2029, the two large lump-sum payments a year will be replaced by smaller, more frequent self assessment payments on account, spread through the tax year. The change was announced in the Autumn Budget, and it could affect up to 3.6 million people. Here is what is changing, who it affects, and how to prepare — while the details are still being worked out.
What is changing?
Today, if you make payments on account, you pay your tax in two equal instalments — on 31 January and 31 July — based on last year’s bill, with a final balancing payment or refund once you file your return. From April 2029, those two lump sums will be replaced by smaller, more frequent self assessment payments on account, collected through the tax year, closer to when the income is actually earned.
The government has not yet confirmed exactly how the new system will work — how often payments will be taken, or how the amounts will be calculated. HMRC published a consultation on the proposals in August, and the details are still being decided. What is confirmed is the direction: tax collected in-year, in smaller bites, rather than in two big bills.
What are self assessment payments on account?
Payments on account are advance payments towards next year’s tax bill. You must make them if your Self Assessment tax bill is over £1,000 and less than 80% of your tax is collected at source (for example, through PAYE). Each instalment is half of last year’s bill: the first is due on 31 January, the second on 31 July. Once you file your return, a final payment tops up any shortfall, or HMRC refunds any overpayment.
The gap this creates is long. The first payment is not due until 10 months into the tax year, and the final balance can take up to 22 months to settle after the income was earned. That delay is exactly what the shake-up is designed to close.
Who is affected?
The change affects anyone who currently makes self assessment payments on account — around 30% of the 12 million people who file income tax Self Assessment returns, or up to 3.6 million taxpayers. That is mainly self-employed people and landlords whose tax is not mostly collected through PAYE. If your whole tax bill is under £1,000, or at least 80% of your tax is already taken at source, you do not make payments on account and this change does not directly affect you.
Why is HMRC doing this?
Officially, the reform is part of the government’s plan to modernise the tax system and narrow the tax gap — the difference between the tax HMRC is owed and what it actually collects. In 2024/25 the tax gap was estimated at around £59 billion, or 6.4% of the tax owed, with small businesses accounting for nearly two thirds of it.
Collecting tax closer to when it is earned also brings self-employed workers more in line with employees, whose tax is taken monthly through PAYE. It reduces the risk of unpaid tax debts if a business fails, and it brings money in sooner, cutting government borrowing. The Treasury predicts the change will raise around £1.3 billion in its first year, rising to £1.8 billion two years later — though it has not published how it calculated those figures. HMRC also plans to hire 670 more compliance officers by 2029/30.
The Treasury says self-employed workers will not face higher taxes under the reform — they will simply pay what they owe earlier.
The cash-flow warning
Tax experts have warned that the changeover could be painful. During the switch, some people may have to pay tax owed from previous years at the same time as making payments towards the current year’s bill. The Office for Budget Responsibility estimates that this overlap will take £17 billion out of self-employed people’s cash reserves in 2029/30 alone.
That matters because many self-employed workers do not have a large buffer. Research from IPSE, the association for the self-employed, found that one in three self-employed workers have less than three months’ worth of business expenses in savings. Seasonal businesses face a particular problem: if most of your income arrives at Christmas, you could be asked to pay tax bills before that money has come in.
Under the current system, the long delay lets you earn interest on your tax savings or use the cash to keep the business running during quiet months. Without that buffer, some taxpayers could struggle to pay. Experts have called for the changes to be introduced gradually, or for taxpayers to be given more time to adjust.
How does this link to Making Tax Digital?
The payment shake-up and Making Tax Digital are separate changes, but they are closely linked. Under Making Tax Digital, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates to HMRC from April 2026, with the threshold falling to £30,000 from April 2027. Making Tax Digital changes how and when you report your income — not when you pay tax. But experts expect the government may use those quarterly digital reports to calculate and collect the more regular tax payments. For now, the government is treating the two reforms as separate while it works out the details of the 2029 payment rules.
How to prepare now
The new, more frequent self assessment payments on account do not start until April 2029, but there are steps worth taking now:
- Start putting your tax aside now. Put money into a dedicated savings pot as soon as you get paid, and tuck extra away during higher-earning months. A cash buffer is the best protection against more frequent bills.
- File your Self Assessment return early. Filing well ahead of the deadline tells you your exact bill months in advance, giving you breathing space to budget for what you owe.
- Keep your books up to date. Tracking income and expenses as you go gives you an accurate, running estimate of what you owe — and it is required under Making Tax Digital anyway.
- Chase late payers. Unpaid invoices create cash-flow bottlenecks, especially when tax bills are due. Consider shorter payment terms and follow up overdue bills immediately.
- Watch your PAYE coding notices. If you also earn income through a job or a pension, check your tax code regularly so HMRC is not taxing you twice or using out-of-date figures.
- Talk to your accountant. They can help you map out a transition plan so overlapping payments do not catch you out.
Frequently asked questions
When do the new Self Assessment payment rules start?
From April 2029. Taxpayers making self assessment payments on account will move to smaller, more frequent payments through the tax year instead of two lump sums.
Will I pay more tax under the new system?
No — according to the Treasury, you will pay the same amount, just earlier. The change is about timing, not the size of the bill.
Who is affected by the shake-up?
Anyone who makes self assessment payments on account — around 3.6 million people, mainly self-employed workers and landlords whose tax bill is over £1,000 and less than 80% collected at source.
How do payments on account work now?
Two equal instalments, on 31 January and 31 July, each half of last year’s bill, with a final balancing payment or refund after you file your return.
Is this the same as Making Tax Digital?
No. Making Tax Digital changes how you report income (quarterly digital updates); the payment shake-up changes when you pay. But the quarterly reports may be used to work out the new, more frequent payments.
This article gives general information about UK tax, not personal financial or tax advice. Tax rules can change, and your situation may be different. Check GOV.UK or speak to a qualified accountant before you act.
