HMRC's In-Year Tax Payment Plan: What It Means for You

Tax Queen

Tax Expert @ Pie

3 min read

HMRC is consulting on a proposal called Timely Payments in Income Tax Self Assessment (ITSA), which would move away from the current twice-yearly payment system towards collecting tax throughout the year. The consultation opened on 23 June 2026. KPMG has now submitted a formal response, raising concerns that could matter to anyone who pays tax through Self Assessment, including sole traders, freelancers, and landlords. Nothing has changed yet, but it is worth understanding what is being proposed.

What Is HMRC Actually Proposing?

If you have a job or pension that pays you through PAYE (Pay As You Earn) as well as other income, such as freelance work or rental income, HMRC wants to start collecting the estimated tax on that other income through your PAYE tax code instead of waiting for your Self Assessment bill.

If you do not have any PAYE income at all, meaning all your income comes from self-employment, freelancing, or property, HMRC wants you to pay an estimate of your tax bill in regular instalments (likely monthly or quarterly) throughout the year, rather than at the end of it.

How This Compares to the System You Use Now

Right now, if you are self-employed or a landlord, you typically make two payments on account, each based on 50% of what you owed the previous year.

These fall due on 31 January and 31 July, with a final balancing payment (or refund) the following 31 January. This new proposal would replace that with more frequent, smaller payments spread across the year.

Why KPMG Has Concerns

KPMG's response raised several practical issues that are worth knowing about, even at this early stage.

Your Take-Home Pay Could Become Unpredictable

If tax on your freelance or rental income is collected through your PAYE code, your monthly salary or pension payment could vary from month to month. There is also a cap on how much can be taken through PAYE, so you could still end up with an unexpected balancing payment later.

Estimates Could Be Badly Out of Date

For people without PAYE income, your instalments would be based on your tax bill from two years prior, so a payment due in 2029/30 would be estimated using your 2027/28 figures. If your income is irregular or has dropped since then, you could be paying instalments that bear little relation to what you are actually earning now.

Cash Flow Could Get Tighter

Many self-employed people invoice for work long before they get paid. Being asked to pay tax on income you have earned but not yet received could put real pressure on your cash flow, and KPMG notes some taxpayers may need to borrow to cover the gap.

KPMG has also pointed out that HMRC has not yet said how interest and penalties would work under the new system, and that many taxpayers are still adjusting to other recent changes, including Basis Period Reform.

What You Should Do Right Now

Nothing is changing yet. This is still a consultation, and KPMG has recommended HMRC allow taxpayers to adjust instalments to match their real income, consider excluding certain groups, and phase in any changes gradually. Whatever the outcome, keeping clean, up-to-date records of your income will make any future transition far easier, and it is good practice regardless of how the rules end up looking.

This is also a useful moment to review how you currently manage your payments on account, and to understand how balancing payments work under the existing system, since both could look quite different if these proposals go ahead.

How Pie Tax Can Help

Pie Tax is built to keep you ahead of exactly this kind of change. You can learn more about why self-employed people choose us and see how our self assessment software works in practice. Whatever HMRC eventually decides, having real-time visibility of your tax position will make any transition easier, so get started with Pie for free today.