At the 2025 Budget, the government announced that ITSA taxpayers with pay as you earn (PAYE) income will be required to pay their estimated ITSA liability in-year from April 2029. That policy is referred to here as ITSA payments through PAYE.

On 23 June 2026, the government published a consultation document seeking views on: 

• how ITSA payment through PAYE could be implemented; and
• new proposals for other ITSA taxpayers to make earlier more frequent payments on account (POA) of their ITSA liabilities (direct ITSA POA). 

An earlier article provides further information.  

ICAEW has responded to the consultation in ICAEW Representation 52/26 (to be published at 2026 Tax Representations | ICAEW in due course).  

ITSA payments through PAYE 

ICAEW does not believe that PAYE is the correct mechanism for more timely payment of ITSA as there are already too many problems with the system, including disputed charges and incorrect or out-of-date PAYE coding notices. In ICAEW’s view, HMRC systems and customer support are not currently in a position to support this change. 

Further, ICAEW has significant concerns that the measure may: 

• Create additional burdens for employers. Increasing the volume of coding notices will place additional burdens on employers, who face increased contact with HMRC to resolve differences and with staff to deal with queries. ICAEW believes that employers and payroll providers should not have to take on additional costs and burdens to facilitate earlier collection of income tax.
• Present cash flow difficulties for taxpayers. PAYE income may be the taxpayer’s only reliable, stable income where they have fluctuating or unpredictable income from ITSA sources. In this case, deducting tax earlier could leave some individuals unable to meet their ongoing financial commitments during the tax year, even if the overall tax liability ultimately due does not change. 
• Impact on the relationship between employers and employees. Taxpayers have raised concerns over confidentiality, as the employer will be made aware that their employees have non-employment income. This knowledge may create bias, whether conscious or unconscious, especially within smaller organisations where the payroll is more likely to be run in house. 

Direct ITSA POA 

ICAEW can see the value of this measure and would support quarterly over monthly payments, as a monthly scheme would be too administratively onerous.  

Using the information provided in making tax digital (MTD) for income tax quarterly updates seems logical but must remain voluntary on the basis that MTD income tax was not intended to facilitate earlier payment of tax; the profits reported are not tax adjusted; and profits may fluctuate significantly throughout the year for some businesses. If the proposals go ahead, agents would need full access to forecasting and the ability to review payments made and allocated.  

Further, the compliance and penalty regime would need to be clarified, and the transitional arrangements would need to be carefully thought out to avoid hardship for taxpayers and negative impact on the economy. ICAEW would strongly suggest a transitional period of more than one tax year and would suggest bringing any reform in over a period of three years.