360 Accounts & Bookkeeping Ltd

    HMRC Monthly Tax Payments for the Self-Employed

    Tax KnowledgeUpdated 7 August 2026

    Overview

    HMRC has launched a consultation called "Timely Payments", which proposes that self-employed individuals and sole traders may in future pay income tax and National Insurance monthly - based on their previous year's tax submission - rather than through the current twice-yearly "payments on account" system. The consultation closes on 4 August 2026. All figures below are correct as of 19 July 2026.

    What is the HMRC Timely Payments consultation?

    HMRC launched the Timely Payments consultation in May 2026. It proposes that from April 2027 (aligned with Making Tax Digital for Income Tax), self-employed individuals with income over £20,000 may be required to make monthly tax payments. These would be estimated from the previous year's Self Assessment submission - a payments-on-account model, but paid monthly rather than twice a year.

    Key figures and thresholds (as of 19 July 2026)

    • Making Tax Digital for Income Tax threshold: £20,000 annual turnover (from April 2026)

    • Current payments on account: 2 payments per year (31 January and 31 July)

    • Proposed monthly payments: 12 equal instalments based on the prior year's liability

    • Consultation closes: 4 August 2026

    • Income Tax: basic rate 20%, higher rate 40%, additional rate 45%

    • National Insurance Class 4: 6% on profits between £12,570 and £50,270, and 2% above £50,270

    Who is affected?

    This is most relevant to sole traders and self-employed individuals. It is also relevant to small business owners and owner-managed limited companies who are weighing up the best structure for their business.

    Is it time to become a limited company?

    If your profits consistently exceed £50,000, incorporating as a limited company may be worth exploring. Limited companies pay Corporation Tax (a 19% small profits rate on profits up to £50,000) rather than income tax through Self Assessment, and would not be affected by this proposal. The right choice depends on your circumstances, so speak to 360 Accounts for a personalised review.

    Frequently asked questions

    Will HMRC definitely make self-employed people pay tax monthly?

    Not yet. It is a consultation that closes on 4 August 2026. HMRC is gathering responses before making a decision, and no legislation has been passed.

    When could monthly payments start?

    If the consultation proceeds, the earliest likely start date is April 2027, aligned with Making Tax Digital for Income Tax.

    Does this affect limited companies?

    No. Limited companies pay Corporation Tax (quarterly if large, or nine months after their year end for small companies). This proposal targets sole traders and the self-employed only.

    Should I become a limited company to avoid this?

    If your profits exceed £50,000 consistently, incorporation may offer tax advantages. Speak to 360 Accounts for a personalised review.

    What are payments on account?

    Payments on account are advance payments towards your tax bill, currently made twice a year (31 January and 31 July). The proposal would change these to monthly instalments.

    Related articles

    Related services

    Personal Taxation

    360 Accounts & Bookkeeping Ltd provides personal tax return and Self Assessment services for individuals across Guildford, Woking and Surrey. We prepare accurate HMRC tax returns, identify legitimate tax reliefs and allowances, and help you understand what to pay and when. You may need to file a Self Assessment tax return if you are self-employed, a company director, landlord, higher earner, receive income from investments, savings or overseas sources, have made capital gains, receive trust income, or need to claim certain reliefs. Tax rules, deadlines and payment-on-account requirements can be confusing. Errors or late returns can result in HMRC penalties and interest. We gather and review the information relevant to your circumstances, including P60s, P11Ds, self-employment records, rental accounts, bank interest, investment income, pension contributions, Gift Aid donations and capital-gains details. We prepare your return, check each figure carefully and send it to you for approval before filing online with HMRC. Our personal tax service covers Self Assessment preparation and filing, tax calculation, payment-on-account guidance, tax code reviews, HMRC correspondence and support with new Self Assessment registrations. We provide a clear summary of your tax position and payment dates, helping you budget with confidence. We take a proactive approach to personal tax planning. As well as ensuring compliance, we review available deductions, allowances and reliefs to help minimise the tax you pay within the law. This may include pension tax relief, Gift Aid, ISA planning, Marriage Allowance, work-related expenses and the timing of asset disposals for Capital Gains Tax. We support complex tax affairs, including multiple income sources, rental property, foreign income, investments and capital gains. With 360 Accounts & Bookkeeping Ltd, you receive practical support and confidence that your personal tax return is complete, compliant and submitted on time.

    View service

    Self Employed MTD

    360 Accounts & Bookkeeping Ltd provides Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) support for self-employed individuals across Guildford, Woking and Surrey. We help sole traders and freelancers move to digital records and regular HMRC submissions. From April 2026, MTD for ITSA is mandatory for self-employed people and landlords with qualifying income above £50,000. From April 2027, the threshold falls to above £30,000. Those affected must keep digital income and expense records and use compatible software to send quarterly updates to HMRC. Early preparation helps avoid late submissions and penalty points. We review your existing bookkeeping, recommend suitable MTD-compatible software and set it up for your business. This includes bank feeds, income and expense categories, Government Gateway connection and moving existing records. We provide practical training and ongoing support, so your system is straightforward to use day to day. Our service includes preparing and submitting quarterly income and expense updates to HMRC. Quarterly deadlines are 5 August, 5 November, 5 February and 5 May. We review figures before filing, track deadlines and flag changes in income or costs. Following the end of the tax year, we prepare the End of Period Statement for your business and submit your final declaration. This brings together business income with other relevant income sources, reliefs and allowances, calculates your overall tax liability and replaces the traditional annual Self Assessment process for those within MTD. We work with cloud accounting software, including QuickBooks, Xero and Free Agent, and can help you choose the option that best fits your business. With 360 Accounts & Bookkeeping Ltd, you receive clear advice, accurate records and support to stay compliant with MTD.

    View service

    Sole Trader Accounts

    360 Accounts & Bookkeeping Ltd provides sole trader accounts and tax support for businesses in Guildford, Woking and across Surrey. We help freelancers, tradespeople, consultants keep accurate records, meet HMRC requirements and reduce tax where legitimate. Every sole trader must keep income and expense records, complete a Self Assessment tax return and pay the correct Income Tax and National Insurance. Our straightforward service removes the burden of accounts and deadlines, leaving you more time to run your business. We prepare annual sole trader accounts that clearly show income, expenses and taxable profit. We complete and submit your Self Assessment tax return to HMRC, ensuring figures are accurate and eligible deductions are claimed. We also advise on allowable expenses, including business travel, use of home, equipment and professional subscriptions. You receive clear tax-payment guidance, including balancing payments and payments on account. Important dates are 5 April, the tax-year end; 31 January, the online filing and main payment deadline; and 31 July, when the second payment on account is normally due. We file in good time to help avoid HMRC penalties. As your business develops, we provide practical advice based on your figures. This may include VAT registration, employing staff, profitability, cash flow and whether trading through a limited company could be appropriate. Incorporation can offer tax and liability advantages, but it also brings extra reporting duties; we explain the options clearly. We support sole traders preparing for Making Tax Digital for Income Tax. MTD starts from April 2026 for qualifying income above £50,000 and from April 2027 for qualifying income above £30,000. We can help with digital records, compatible software and quarterly reporting. With a dedicated accountant and accessible support by phone, online or at our Guildford office, 360 Accounts & Bookkeeping Ltd makes sole trader accounting simple, compliant and useful.

    View service

    Related resources

    Still have questions?

    Talk to our team of accountants and bookkeepers — we'll give you a straight answer.