As part of Tax Update 2026, the government has published a consultation document seeking views on: 

• the requirement for ITSA taxpayers with pay as you earn (PAYE) income to pay their estimated ITSA liability in-year from April 2029 (referred to as ITSA payments through PAYE); and
• the potential for other ITSA taxpayers to make earlier payments of their ITSA liabilities (direct ITSA payments on account (POA)).

The term “ITSA taxpayers” includes sole traders and landlords who are within scope of Making Tax Digital for income tax.  

The government says that it “wants to ensure that paying tax is straightforward for taxpayers and is paid closer to real time, reducing the likelihood of late payments or taxpayers falling into tax debt”. The consultation document notes that “around one-in-five ITSA tax bills are paid late”. 

Current position 

Currently, individuals pay tax due under ITSA (eg, income tax on savings or dividends income, or on profits from a sole trade or property rental business) for a tax year either: 

• in one payment, due by 31 January after the end of the tax year; or
• in two POA, with the first due on 31 January during the tax year and the second on 31 July after the end of the tax year. A balancing payment may be required by 31 January after the end of the tax year where the tax paid through POA is less than the final tax liability.  

POAs are based on the individual’s ITSA liability for the previous tax year. The criteria for having to make POA, which are explained in HMRC’s guidance, include that the tax due under ITSA for the previous year is equal to or more than the POA threshold of £1,000. 

ITSA payments through PAYE 

At the Autumn Budget 2025, the government announced that ITSA taxpayers with a PAYE source of income (ie, an employment or a private pension) will be required to pay more of their ITSA liabilities in-year via PAYE from April 2029. The consultation document provides further details and reveals that approximately 2.1 million of the 12 million taxpayers in ITSA are expected to fall within the proposals.

The government is seeking views on the design of the reforms, including the safeguards. For example, the government is considering whether the current 50% cap (of PAYE income) on the amount of tax that can be deducted should be revised for some groups of taxpayers. 

The government is also interested in receiving views on the potential impacts of the reforms on employers, pension providers and taxpayers with varying income.  

Direct ITSA POA 

The government would also like to explore increasing the frequency of POA from April 2029, with monthly or quarterly instalments to be paid in the same year as the taxable activity, through direct ITSA POA. Similar to the proposals for ITSA payments through PAYE, the POA could be forecasted based on the previous year’s ITSA liability, with the taxpayer able to update their forecasts. A balancing payment or repayment may be required depending on the circumstances. 

The government estimates that approximately 2.5 million of the individuals who can’t pay their ITSA liabilities through PAYE currently make POAs. However, the changes could extend to more ITSA taxpayers as the government is also seeking views on the impact of reducing the POA threshold of £1,000.  

Transitional arrangements 

The government recognises that, in 2029/30, taxpayers will be required to pay their ITSA liabilities for both 2028/29 (under the current system) and 2029/30 (under the proposed system), and is seeking views on how it can support taxpayers to manage the transitional period, including both the use of optional advance payments and spreading the liability for 2028/29 over a longer time period.