The aim is to bring tax payments closer to the point at which income is earned and reduce the need for taxpayers to meet large Self Assessment bills at certain points in the year. However, the change could have important cashflow implications, particularly during the transition to the new system. Our Tax Manager, Nickie Antley-Slater, explains more in our blog below.
Who will have to pay Self Assessment tax through PAYE?
Around 12 million people currently file a Self Assessment tax return each year, with approximately 7 million also receiving income through PAYE, for example from employment or a pension.
From April 2029, taxpayers with sufficient PAYE income will be required to make payments towards their forecast Self Assessment liability through PAYE.
The government is also considering more regular payments for taxpayers who do not have sufficient PAYE income, potentially through changes to the existing Payments on Account system.
The concept of collecting Self Assessment tax through PAYE is not entirely new. Under the current system, HMRC can collect certain Self Assessment bills through a taxpayer’s PAYE tax code, subject to eligibility criteria and limits.
How the new Self Assessment tax payment process will potentially work
HMRC intends to use information from a taxpayer’s latest Self Assessment return to forecast the amount of tax they are likely to owe. Where there is sufficient PAYE income:
- HMRC will use the forecast liability to determine the amount to be collected
- the taxpayer’s PAYE tax code will be adjusted
- payments will be collected from salary or pension income each payday
- taxpayers with changing income will be able to update their forecast so that payments can be adjusted.
The intention is to spread Self Assessment tax payments throughout the year rather than taxpayers having to meet larger bills at particular payment deadlines.
Self Assessment tax returns will still be required
Paying towards Self Assessment tax through PAYE will not remove the requirement to complete a Self Assessment tax return where one is required.
The return will establish the taxpayer’s actual liability for the year. The amount already collected will then be taken into account, meaning there could be:
- a balancing payment still to make, or
- a repayment due where too much tax has been collected.
Will taxpayers pay more tax under the new system?
The reforms will change when tax is collected, rather than increasing the amount of tax someone owes.
HMRC says Self Assessment tax can currently be paid up to 22 months after the relevant income is received. Moving towards smaller and more frequent payments is intended to make tax bills easier to budget for and reduce the risk of taxpayers falling into debt.
For those affected, however, the change could mean less take-home pay throughout the year as tax that would previously have been paid later is collected earlier through PAYE.
Managing the transition to Self Assessment tax through PAYE
The new arrangements for taxpayers with sufficient PAYE income are due to begin from 6th April 2029.
From that point, affected taxpayers will begin making payments towards their forecast 2029/30 Self Assessment liability each payday, bringing payment of tax closer to the point at which income is earned, therefore the 2029/30 tax year could require some careful cashflow planning.
During the transition, taxpayers may need to make:
- remaining payments relating to their 2028/29 Self Assessment liability under the existing system
- new in-year payments towards their forecast 2029/30 liability through PAYE.
HMRC has recognised the potential impact of this overlap, particularly for people with seasonal or fluctuating income, and transitional arrangements and safeguards formed part of its consultation.
What the new Self Assessment tax payment process will mean for employers
Employers will not be responsible for calculating an employee’s Self Assessment liability.
HMRC intends to reflect the required deductions in the employee’s tax code, with employers continuing to operate PAYE in the usual way.
Employers and payroll teams could, however, see changes to employees’ tax codes and receive questions from staff whose take-home pay changes as a result.
LWA’s Tax and Payroll Services teams are here to help you prepare for changes to Self Assessment tax payments through PAYE
April 2029 may seem some way off, but the changes represent a significant shift in when some taxpayers will pay their Self Assessment liabilities and could affect personal and business cashflow.
HMRC’s consultation has now closed, with the government expected to publish its response in autumn 2026. This should provide further detail on how the new arrangements, transitional measures and safeguards will work in practice. Our team will keep you updated as soon as we know more.
In the meantime, if you receive employment or pension income through PAYE alongside self-employed, property or other income reported through Self Assessment, and would like advice on the upcoming changes, the LWA team are here to discuss your current tax obligations and keep you informed as further details of the new system are confirmed.
Please contact us on 0161 905 1801 in our South Manchester office, or 01925 830 830 for our Warrington team, or you can email mail@lwaltd.com with ‘Self Assessment tax through PAYE’ in the subject field.