Pay Tax by 2029? HMRC's 'Timely Payment' Proposals Explained

If you already find January and July tax deadlines hard to manage, HMRC’s Timely Payment proposals are worth watching closely.

They could change when some self-employed people and small business owners pay Income Tax from April 2029. Not the amount of tax you owe overall — but the timing, the frequency, and the pressure it could put on your cash flow if you’re not prepared.

The proposals are not law yet. HMRC’s consultation closed on 4 August 2026, and a formal response is expected in autumn. But if you work for yourself, file a Self Assessment return, or juggle PAYE income with untaxed income, this is the kind of tax change you’ll want to understand early.

Understanding what HMRC is proposing

At the moment, many people in Self Assessment pay tax through:

• A balancing payment by 31 January

• A first Payment on Account for the following year, also by 31 January

• A second Payment on Account by 31 July

A Payment on Account is an advance payment towards your next tax bill. It’s usually based on your previous year’s Income Tax liability.

That system can be awkward. You may have a large tax bill landing at a point when cash is tight, even if your business has performed well on paper.

HMRC’s consultation, Timely Payments in Income Tax Self Assessment, looks at moving towards smaller, more regular payments during the tax year.

HMRC says the aim is to:

• Reduce large year-end tax bills

• Help people budget more steadily

• Reduce late payments and tax debt

• Bring Self Assessment closer to the “pay as you go” feel of PAYE

So what’s the big shift? You may end up paying tax closer to the point when HMRC believes you’ve earned it, rather than waiting for the usual January and July pattern.

Identifying who is likely to be affected first

The clearest first group is people who:

• File a Self Assessment tax return, and

• Also have sufficient PAYE income

That could include someone who is employed part of the time and also has self-employed or other untaxed income on the side.

From April 2029, HMRC proposes collecting forecast Self Assessment tax through PAYE each pay period. In practice, that would usually mean a tax code adjustment.

The forecast would be based on your most recently filed Self Assessment return. You would still submit an annual tax return, and HMRC would then compare what was collected with what you actually owed.

That means:

• If too little tax was collected, you would still need to pay a balancing amount

• If too much tax was collected, you should receive a repayment

• Your PAYE take-home pay could change during the year

There is also a proposed cap limiting forecast Self Assessment tax collected through PAYE to 50% of your PAYE income in a pay period. That said, the final safeguards and mechanics could still change.

Looking at what may happen if you do not have PAYE income

What if you are fully self-employed and do not have enough PAYE income for HMRC to collect tax this way?

That part is less settled. HMRC is exploring possible changes to direct Payments on Account for people who are mainly or entirely within Self Assessment.

Possible models mentioned in the consultation include:

• Monthly payments during the tax year

• Quarterly payments during the tax year

• Forecast payments based on previous Self Assessment returns

• A final balancing payment or repayment once the return is filed

At this stage, HMRC has not confirmed that every sole trader will have to pay monthly, and it has not finalised how any new calculation method would work.

For now, the current rules still apply. If you are already required to make Payments on Account, the normal January and July system remains in place unless and until the law changes.

Watching out for the practical risks

On paper, smaller and more frequent payments may sound easier. But will they always feel easier in real life?

Not necessarily — especially if your income is uneven, delayed, seasonal, or hard to predict.

Here are some of the main issues to watch:

• Forecasts may be out of date. If your previous tax return showed a strong year but your current year is weaker, deductions or advance payments could be set too high.

• Cash flow may not match taxable income. You might owe tax based on work already done even though payment has not reached your bank account yet.

• Take-home pay could drop unexpectedly. If tax starts being collected through PAYE, your payslip could change faster than your household budget does.

• Forecasting may get harder, not easier. If income moves around during the year, you may need to review your figures more often.

• Adjustments may come later. If HMRC’s estimate is wrong, the correction may not happen until after your annual return is filed.

This is why Timely Payment is not just a technical tax change. It is also a cash flow and forecasting issue.

Preparing for the transition overlap

One of the biggest practical concerns is the changeover period.

Under the current rules, you may still have Payments on Account due for the 2028/29 tax year:

• The first payment by 31 January 2029

• The second payment by 31 July 2029

At the same time, new in-year payments for the 2029/30 tax year could begin from April 2029.

So yes — there is a real possibility of an overlap. You may not pay more tax overall, but you could be paying under the old system while also starting under the new one.

That creates a few obvious risks:

• Short-term pressure on working capital

• Confusion over which payment relates to which tax year

• A bigger need for accurate forecasts and up-to-date records

• Less room for error if you already run tight on cash

HMRC has said it is considering transition arrangements, including ways to spread existing liabilities. But nothing is final yet, so this is an area to keep under close review.

Taking practical steps now

You do not need to change how you pay tax today just because a consultation has happened. But you can get yourself into a much stronger position now.

Keeping your records current

If tax payments become more frequent, stale records will become a bigger problem.

Focus on the basics:

• Record income promptly

• Keep receipts and evidence for allowable expenses

• Reconcile your bank account regularly

• Separate business and personal spending where possible

• Keep details of any PAYE income alongside self-employed income

• Use digital record-keeping software consistently

Good records make it easier to check whether HMRC’s view of your tax position matches reality.

Monitoring your cash flow

This matters just as much as compliance.

Track:

• Money owed to you

• Expected payment dates

• Tax already set aside

• Upcoming January and July liabilities

• Periods when income may dip

• Large one-off costs that could affect available cash

A proposal like Timely Payment is manageable when you can see your cash position clearly. It becomes much harder when you are working from guesswork.

Reviewing forecasts when income changes

What happens if your income drops, a contract ends, or a major customer pays late?

Do not leave it until the next tax return if your numbers have moved sharply. Depending on the rules in force at the time, you may need to revisit your forecast or review whether existing Payments on Account are still appropriate.

Just be careful. Reducing Payments on Account too aggressively can lead to a larger balancing bill later.

Getting accountant support early

If these proposals move forward, many people will need more help understanding:

• Income earned versus income received

• Tax already paid versus tax still expected

• Whether HMRC’s forecast looks reasonable

• How the transition period affects cash flow

• What action to take when circumstances change

At Creative and Numbers, we help self-employed people and small businesses stay on top of bookkeeping, Self Assessment, tax returns and day-to-day tax questions. We can also help you keep records up to date, sense-check forecasts, and prepare for rule changes before they become urgent.

Knowing what to look out for next

The consultation has closed, but the story is not over. HMRC is expected to publish its response in autumn 2026, with legislation expected ahead of the proposed April 2029 start date.

If you want to stay informed, keep an eye on:

• Whether PAYE collection remains mandatory for affected taxpayers

• How HMRC defines “sufficient PAYE income”

• Whether monthly or quarterly payments will apply to people without PAYE income

• How and when forecasts can be updated

• What safeguards are introduced for people with fluctuating income

• How the transition into 2029/30 will work

• Whether there will be any element of taxpayer choice

These details will shape whether Timely Payment feels like a helpful smoothing of tax bills — or a more demanding cash flow regime.

Learning more from reliable sources

If you want to go deeper, start with official and practical sources rather than rumours or social posts.

Useful places to check include:

• HMRC’s consultation document: Timely Payments in Income Tax Self Assessment

• Future updates on GOV.UK as HMRC publishes its consultation response

• Professional commentary from accountancy bodies and advisory firms

• Guidance from your accountant based on your own income pattern and tax position

You may also find it useful to review related admin changes now. Our Making Tax Digital guide for UK creatives explains how digital record-keeping is becoming more important across the tax system.

Staying ready before the rules are final

The Timely Payment proposals are still proposals. But if you are self-employed or run a small business, they are worth taking seriously now — because the businesses that cope best with tax change are usually the ones that prepare before the deadline pressure starts.

Keep your records current. Watch your cash flow. Review your forecasts. Follow HMRC updates. And get advice if you are unsure how the proposals could affect you.

Need help understanding HMRC’s Timely Payment proposals or preparing your bookkeeping and tax systems for possible change? Get in touch with Creative and Numbers. We’ll help you understand what the proposals mean, what to watch out for, and what practical steps to take next.