When Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) was first introduced, HMRC was clear that the new tax recording and reporting regime would not change when payments fell due.
Sole traders and landlords were reassured that their payment dates would stay exactly as they were – either once a year or twice a year through payments on account (POA).
However, a new consultation published as part of Tax Update 2026 suggests that this may be about to change in the next few years.
What is HMRC actually proposing?
The Government wants certain ITSA taxpayers to start paying their tax in instalments during the year it is earned, rather than largely after the fact from April 2029.
Taxpayers with a PAYE source of income, such as a job or a private pension, would have more of their ITSA liability collected through their tax code in-year. Around 2.1 million of the 12 million people currently in ITSA are expected to fall within scope.
Every other ITSA taxpayer who currently makes POA, such as sole traders, landlords and partnerships, could see those payments become more frequent too, moving from twice a year to monthly or quarterly instalments.
How would it actually work?
Based on the consultation, a taxpayer paying monthly would see 12 instalments deducted through PAYE, each worth 8.3 per cent of their forecast liability for the year.
That forecast would be built from the previous year’s tax bill, with scope to update it as better information comes in, thanks in part to MTD for ITSA.
A balancing payment would then be due the following January, once the actual figure is known from the tax return.
HMRC’s reasoning for the change
The consultation notes that around one in five ITSA bills are currently paid late and the Government wants tax collected closer to real time so fewer people fall into debt over a bill they were not prepared for.
There is a fair argument here, as smaller, regular deductions can be far easier to manage than a single large bill arriving months after the income was earned.
For anyone who has ever struggled to put money aside for a January payment, spreading that cost across the year could genuinely help.
It is a proposal, not a decision
At the moment, nothing is confirmed and the Government is actively asking for feedback on the detail, including safeguards such as the current cap on how much can be taken through PAYE.
This consultation closes on 4 August 2026 and transitional support is also being considered for the period where two years of tax could otherwise fall due close together.
We will be following this closely as it develops, but if you want to understand how it might affect you specifically, contact our team.