Budget 2026: LLP partners ‘hardest hit’ by self assessment payment shake-up

Jacob Grattage, Reporter, Business & Accountancy Daily. Croner.

Partners at accountancy firms and self employed will have to pay in-year tax, possibly quarterly, under major overhaul of self assessment system.

Millions of self assessment taxpayers will have to pay tax either quarterly or monthly in a major shake-up of in-year payment on account rules from April 2029.

Despite major opposition to a consultation on the proposals over the summer, the Treasury is going ahead with plans to require all self employed, including partners at accountancy and law firms set up as limited liability partnerships (LLPs), to pay tax more frequently as it moves ‘smaller, more regular payments’ rather than twice yearly payments on account.

There were 3,630 responses to the consultation with many respondents opposing mandatory collection through PAYE and raising concerns about cashflow, complexity and loss of taxpayer control.

But at Budget 2026, the Treasury confirmed it will extend regular payments, akin to the PAYE system, to the wider income tax self assessment population currently settling tax bills through payments on account.

The Treasury said the requirement for more frequent payments of tax would raise £1.3bn in 2029-30, indicating that it sees the move as a way to clamp down on tax avoidance and possibly high level of errors in tax returns and payments.

David Portman, tax partner at Lubbock Fine, warned: ‘Accountants are likely to be among the hardest hit because the amount of tax they pay each year can be significant, but the changes will also affect lower earners and other self-employed people as well as those with significant savings income.’

Under the current system, taxpayers typically make two payments on account each year, in January and July, with any remaining tax due by the following 31 January.

The HMRC policy paper stated: ‘Taxpayers will make regular, smaller payments throughout the year, rather than large lump sum payments long after income is earned. This will help taxpayers to budget for and manage their tax bills over the year, including reflecting changes in their income and circumstances.’

While the Treasury is yet to confirm how frequently taxpayers will be required to make in-year payments, its preferred timing is quarterly payments.

Acknowledging the level of opposition to the proposals, the Treasury stated: ‘While most respondents preferred to retain the existing payment schedule, those who were open to reform generally favoured a quarterly payment schedule as opposed to monthly.’

From April 2028, HMRC will require automated in-year payments, for example by direct debit.

Now HMRC will need to launch a major communications programme to advise taxpayers of this very significant change at the same time as millions of taxpayers are being dragged into the new Making Tax Digital (MTD) for Income Tax system.

‘HMRC will provide further information and support in advance of implementation,’ the government stressed.

Portman warned: ‘Bringing forward self assessment payments might seem harmless because the amount of tax people pay stays the same, but it could leave many short of cash. It gives HMRC a big cashflow advantage at the cost of taxpayers. Those with fluctuating income may be particularly hard hit.’

Portman urged the government to ‘consider delaying the proposal’, a view echoed by many tax experts.

One of the major concerns is that this is a radical change to the existing with few benefits for taxpayers and all the upside for HMRC.

Elsa Littlewood, private client services tax partner at BDO, said: ‘This will represent a major change for millions of people who have become accustomed to putting money aside for their twice-yearly self assessment payments.

‘It will also have a significant impact on cashflow going into government coffers – a key driver for the introduction of the new regime.’

On the many downsides, Littlewood stressed: ‘Cash flow will be a real concern for some taxpayers… Bringing those payments forward means taxpayers will have access to that cash for less time so will earn less interest on it.’

For full Budget coverage, go to Budget 2026 at a glance

Timely Payments in Income Tax Self Assessment (ITSA)