Pay Self Assessment through tax code: file by 30 December

This article is stated as at 31 October 2026 and covers 2025/26 returns only; HMRC can change its guidance on coding out, and the dates differ for later years. Take advice on your own circumstances before acting.

Employees and pensioners who owe less than £3,000 on their 2025/26 return can avoid paying a lump sum on 31 January 2027. If you file online by 11:59pm on 30 December 2026, you can pay Self Assessment through tax code deductions, with HMRC collecting the balance from your salary or pension in 12 equal instalments during 2027/28. HMRC does this automatically for anyone who qualifies unless they opt out on the return. The paper deadline for coding out was 11:59pm on 31 October 2026, so filing online is now the only way to qualify.

Who can pay Self Assessment through their tax code?

GOV.UK sets out three conditions, and you must meet all of them to have your bill collected through your tax code:

you owe less than £3,000 on your 2025/26 return;
you already pay tax through PAYE, as an employee, a director on the payroll or someone receiving a company or private pension;
you submit a paper return by 31 October 2026 or an online return by 30 December 2026.

Meeting all three is not quite enough, because HMRC then checks that your PAYE income can carry the extra deductions. It will refuse to code out the balance in any of these cases.

Check (UK-wide, 2025/26 returns)	Coding out is refused if
PAYE income	there is not enough of it for HMRC to collect the whole amount, or there is no live job or pension
Share of pay	you would pay more than 50% of your PAYE income in tax
Doubling	you would end up paying more than twice as much tax as you normally do
Part payment	you owed £3,000 or more and paid some of it to get below the limit

The doubling and half-of-pay tests often catch company directors. Many owner-managers take a small salary and the rest of their income as dividends, so little or no tax goes through the payroll. Adding even a modest Self Assessment balance to that code will often more than double the tax deducted, or take it past half of the salary, and HMRC will then expect payment in the usual way. If that describes you, plan to pay by 31 January 2027 whenever you file.

What counts towards the £3,000 limit

GOV.UK says “less than £3,000” and HMRC’s manuals say £2,999.99 or less, which comes to the same thing. The figure tested is wider than the balancing payment on your return, though. HMRC’s guidance to its own staff adds any payments on account still outstanding for the year and any amounts already moved into your tax code for that year.

So a bill can fail the test even when the balancing payment looks small. Take a hypothetical pensioner whose 2025/26 return shows a balancing payment of £1,800 but who has not yet paid a £1,500 payment on account: HMRC sees £3,300 and the balance is not coded automatically. The staff guidance says that once the payment on account is settled the balance falls within the limit and should be coded manually “if possible”. Those last two words carry a lot of weight, so if you have an overdue payment on account, clear it before you file rather than relying on HMRC to tidy up afterwards.

What you cannot do is pay part of the bill yourself to bring it under the limit. Someone who owes £3,400 cannot pay £500 and have the remaining £2,900 coded: the whole £3,400 is due by 31 January 2027. Amending a return later can also catch people out. If an amendment increases a coded amount, HMRC adds the increase to your code only where the total stays below £3,000, and anything above that is left on your Self Assessment account to be paid directly.

When does HMRC take the money from your pay?

HMRC doesn’t collect the balance straight away. It goes into the following year’s tax code, which for a 2025/26 return is your 2027/28 code, running from 6 April 2027 to 5 April 2028, and is taken in equal instalments over 12 months alongside your usual deductions.

For a hypothetical employee paid monthly who owes £2,400, the choice looks like this.

2025/26 balance of £2,400 (UK-wide)	Paid directly	Coded out
When it is paid	One payment by 31 January 2027	12 deductions during 2027/28
Amount	£2,400	12 deductions of £200 (£2,400 divided by 12)
Effect on take-home pay	None	£200 less on each of 12 payslips in 2027/28

Coding out is a deferral, and a useful one: the first deduction comes after the January deadline has passed and the last near the end of the 2027/28 tax year. The price is a smaller payslip for 12 months, which can bite when the household budget is tight.

HMRC codes the whole balance or none of it. If your earnings are too low to absorb the full amount, nothing is coded, and HMRC won’t spread a balance over more than one tax year; its staff are told to consider a payment plan instead. If your job or pension has ended, the balance can’t be collected through PAYE at all. Anyone expecting to retire, change jobs or cut their hours during 2027/28 should think carefully, because a balance that can’t be collected goes back onto the Self Assessment account and may need paying at short notice.

Your Self Assessment statement will show the coded amount as “Included in PAYE Code for Year” followed by the year. When your 2027/28 coding notice arrives, check that the adjustment matches the balance from your return and query anything larger. Our guide to HMRC tax codes explains how to read the notice.

Should you let HMRC code out your bill, or opt out?

Coding out is automatic, so the real decision is whether to stop it. For most employees and pensioners with a modest balance and a secure job or pension, we’d let it happen: there’s no lump sum to find in January, nothing to set up, and the money leaves with the rest of your tax.

We’d suggest opting out in a few situations:

you already have the money set aside and would rather clear the bill now, keeping your 2027/28 take-home pay steady;
your PAYE income may stop or fall during 2027/28;
you are a director whose salary is unlikely to pass HMRC’s checks anyway, so you would rather plan the January payment from the start.

To opt out, make the request on the return itself. GOV.UK says HMRC collects the balance through your code unless you’ve specifically asked it not to on your tax return. Look for the option on the return about collecting tax through your tax code, and choose it before you press submit. If we prepare your return, tell us your preference before we file it.

If coding out isn’t available or doesn’t suit you, there are other routes. For future bills, a Budget Payment Plan lets you pay weekly or monthly by Direct Debit towards your next Self Assessment bill, provided you are up to date with the last one, and you can pause payments for up to 6 months. If you can’t pay the 2025/26 bill by 31 January 2027, contact HMRC about a payment plan for overdue tax as early as you can. Leaving tax unpaid is expensive: late payment penalties are 5% of the tax unpaid at 30 days, 6 months and 12 months, and interest is charged on top. On an unpaid bill of £3,400, the 30-day penalty alone is £170.

Do you still owe payments on account if your bill is coded out?

Coding out deals with the 2025/26 balance only, and it does not on its own settle whether you owe payments on account for 2026/27. Payments on account are each half of last year’s tax bill, due on 31 January 2027 and 31 July 2027. They are not required if last year’s tax was less than £1,000, or if more than 80% of your tax was paid outside Self Assessment, for example through your tax code. Many employees and pensioners with modest side income meet one of those tests, but don’t assume it: the calculation on your return shows whether anything is due on 31 January 2027, even when the balance itself is being coded out.

The self-employed have one more thing to watch. Class 2 National Insurance cannot be collected through a tax code unless it has been due since before 6 April 2015. So if your return does include Class 2 National Insurance, that part stays on your Self Assessment account even when the rest is coded, and you must pay it directly by 31 January 2027.

If you are still gathering your figures, our notes on completing your tax return cover the main pages. Filing early has a second benefit beyond coding out, because you know the size of your January bill weeks before you need to pay it.

Key dates for 2025/26 returns

Date (UK-wide)	What happens
31 October 2026, 11:59pm	Paper return deadline, and the last chance for a paper return to qualify for coding out
30 December 2026, 11:59pm	Last time to file online and have a balance under £3,000 collected through your tax code
31 January 2027, 11:59pm	Online filing deadline; 2025/26 balance and first 2026/27 payment on account due
6 April 2027 to 5 April 2028	2027/28 tax year, in which a coded balance is collected over 12 months
31 July 2027	Second 2026/27 payment on account due

Filing online on 31 December 2026 or later brings no penalty as long as the return is in by 31 January 2027, but the bill then has to be paid by that date in some other way. Miss 31 January and the late filing penalty starts at £100, however small the tax, rising after 3 months by £10 a day up to £900. Our piece on why so many people miss the January deadline is a useful reminder of how quickly the weeks after Christmas go.

If you are new to all this, our introduction to Self Assessment explains who has to file and why. For anyone who qualifies, the practical advice is simple: get the return filed online before 30 December 2026, decide deliberately whether you want the balance in your 2027/28 code, and check the coding notice when it arrives.

Questions clients ask

How do I get HMRC to take my tax bill from my wages?

You don't need to apply. If you owe less than £3,000 for 2025/26, already pay tax through PAYE and file online by 11:59pm on 30 December 2026, HMRC adds the balance to your 2027/28 tax code automatically, provided your PAYE income passes its checks. Just make sure you have not chosen the option on the return asking HMRC not to collect it this way.

I owe £3,200. Can I pay £300 now and have the rest put in my tax code?

No. HMRC will not code out a bill of £3,000 or more that has been brought below the limit by a part payment, so the full £3,200 is due by 31 January 2027. If that is difficult, contact HMRC about a payment plan for overdue tax, because a 5% late payment penalty applies to tax still unpaid 30 days after the deadline, with interest on top.

When will HMRC start taking the money from my salary or pension?

A 2025/26 balance is collected through the following year's code, so the deductions run through the 2027/28 tax year, which starts on 6 April 2027. The amount is split into 12 equal instalments alongside your normal tax. Nothing extra comes out of your pay before then. Check your 2027/28 coding notice when it arrives to confirm the figure matches your return.

What happens if I file my online return on 31 December or later?

Your balance can no longer be collected through your tax code, whatever its size, because HMRC's guidance tells its staff not to code out returns received after 30 December. You must pay by 31 January 2027 another way. There is no late filing penalty if the return is in by 11:59pm on 31 January 2027; after that the penalty starts at £100.

Can I have my bill coded out if I am retiring next year?

It depends on what income you will have. HMRC collects the balance through your 2027/28 tax code, so it needs PAYE income to deduct from. A company or private pension paid through PAYE counts, but if your job ends and nothing else is paid through PAYE, the balance cannot be collected that way and may come back to you for direct payment, often at short notice.

Speak to us. To discuss how this affects you or your business, please contact your usual Jack Ross partner, call us on 0161 832 4451 or send us a message.

Pay Self Assessment through tax code: file online by 30 December