For decades, millions of UK taxpayers have relied on the Self Assessment system to declare income, report taxes and settle any amounts owed to HMRC once a year. Even individuals who already pay tax through PAYE have often needed a tax return to disclose freelance income, rental earnings or investment gains.
From 2026 onwards, however, HMRC is preparing to reshape this routine. A major reform has quietly been introduced, one that could remove large groups from the Self Assessment system and pull others into a more frequent, real-time payment structure. The idea is simple on the surface: collect tax earlier in the year rather than waiting until January. The implications in the real world are far more complicated.
Let us break down exactly what is changing, who may no longer need a tax return after 2026, who will be affected by the new PAYE-based adjustments, and why HMRC believes this shift will make the system more efficient.
What Sparked the Debate About Tax Returns Being Scrapped
Buried inside the Budget documents was a short sentence that dramatically changes how Self Assessment could operate. The official statement noted that from April 2029, taxpayers with PAYE income will be required to pay more of their Self Assessment tax liabilities in-year through their PAYE tax code. HMRC will consult on the details in early 2026, but the direction is clear.
Currently, two main systems collect income tax in the UK:
- PAYE, which automatically deducts tax from salaries and pensions.
- Self Assessment, which requires individual taxpayers to report other income streams such as freelance earnings, property income, dividends or capital gains.
Why HMRC Wants This Change
According to HMRC, spreading tax payments throughout the year will help people manage their cash flow better and avoid large January bills. The official explanation is taxpayer convenience.
The shift will begin with taxpayers who earn both PAYE income and income that normally falls under Self Assessment, such as:
- Side businesses
- Freelance work
- Rental properties
- Online selling
- Investment income
How the Current System Works and Why It Will Change
Under the existing Self Assessment system, taxpayers usually make a balancing payment in January following the end of the tax year. Some also make payments on account in January and July if their tax due exceeds 1,000 pounds.
However, over 1.1 million people failed to make payment on account in January this year, forcing HMRC to chase overdue amounts. This has encouraged the government to find mechanisms that secure payments earlier and reduce late settlements.
The 2026 Reform: Who Will No Longer Need a Tax Return
This is the part that has generated the most interest. If HMRC succeeds in shifting certain income streams into PAYE coding adjustments, many people may not need to file a Self Assessment return anymore.
You may no longer need a Self Assessment tax return after 2026 if:
- You are fully taxed under PAYE
- Your additional income can be collected through adjustments to your tax code
- You do not have complex income streams that require manual calculation
Examples include:
- Small amounts of freelance income where earnings are steady
- Modest levels of rental income where tax due is predictable
- Investment interest where the amounts are known in advance
Who Will Still Need a Tax Return After 2026
Not everyone will escape the Self Assessment process. Many taxpayers will still need to file due to complexity or irregularity in their income streams.
You will still need to file a Self Assessment return if you:
- Have income that cannot be collected accurately through a tax code
- Own multiple rental properties
- Earn irregular seasonal income
- Receive large capital gains
- Need to claim reliefs and allowances
- Are self-employed with fluctuating profits
- Have foreign income or two-country tax residencies
- Have trust income
- Operate as a partner in a business
Will HMRC Increase PAYE Coding Adjustments
Under the new rules, HMRC will gain the power to adjust your PAYE tax code to collect tax from sources that traditionally fell under Self Assessment. This is a major change because, currently, HMRC cannot adjust your code to collect tax from self-employment or property income unless you agree.
The limit of 3,000 pounds that can be collected through coding adjustments may also be reviewed, and more taxpayers could see K codes. K codes reduce your tax-free allowance or add tax liabilities directly into your PAYE calculations.
Accountants have expressed concerns, noting that:
- Many taxpayers already find tax codes confusing
- Monthly code changes could become stressful
- Coding errors may lead to over or underpayment
- Refunds could become slower
- Seasonal earners may pay tax before receiving income
Key Concerns Raised by Experts
Professional accountants and tax bodies have flagged several issues that HMRC must resolve:
- Tax code accuracy remains unreliable.
- Seasonal or irregular income is hard to forecast.
- Coding adjustments could cause cash flow problems.
- There could be an increase in disputes and refund requests.
- HMRC’s digital infrastructure may not be ready for widespread real-time changes.
- Self Assessment removes human intervention, but tax code adjustments require assumptions that may not be accurate.
Does This Mean the End of the Annual Tax Return
No, not yet. The Self Assessment system will still exist, but:
- Fewer people will need it
- Fewer taxpayers will file manually
- PAYE will absorb more tax collection functions
- Digital and automated systems will gain priority
- MTD for Income Tax will continue as planned from April 2026
The New Reporting Roadmap: Making Tax Digital (MTD)
The “scrapping” of the annual tax return is actually a transition to quarterly digital reporting. Depending on your “qualifying income” (your total gross income from self-employment and property), you will be mandated to switch on the following dates:
| Tax Year Start | Gross Income Threshold | What Changes? |
| April 2026 | Over £50,000 | Must keep digital records and send 4 quarterly updates + 1 final declaration. |
| April 2027 | Over £30,000 | The mandate extends to those in this middle-income bracket. |
| April 2028 | Over £20,000 | The final planned phase for smaller businesses and most landlords. |
The Bottomline
HMRC’s upcoming changes have one clear message. A significant shift is coming, one that will push the UK tax system closer to real-time digital collection. For many taxpayers, the annual Self Assessment process may disappear. For others with more complex affairs, the traditional tax return will remain a necessity.
The reform is designed to simplify tax collection, but practical challenges remain. Coding accuracy, refunds, seasonality, cash flow issues and system reliability will all need to be addressed. Until then, the safest approach is to stay informed and prepare for more frequent tax updates in the years leading up to 2029.
Note: While the “traditional” January-to-January cycle is being broken, taxpayers will actually be interacting with HMRC more often (quarterly) rather than less, due to the Making Tax Digital (MTD) rules also launching in 2026.
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