Sneaky change is a blow for side hustles

Side hustles and the so-called eBay tax (which isn’t actually a new tax at all) have been under the microscope in the last couple of years. With an ongoing cost of living crisis, it’s not surprising that people are looking to boost household income by having small businesses. Under the current rules for self-assessment, someone with employment income that has a balancing payment on the tax return can opt to have this collected via a PAYE coding adjustment, as long as it doesn’t exceed £3,000 and the return is filed by the 30^th December after the end of the tax year. This is optional though, the payment can be made using the usual self-assessment deadlines instead. But HMRC will be making this mandatory from 2029 onward. The first year (2029/30) will not only collect the previous underpayment, it will also collect an estimate of the current year’s liability, forcing those with side hustles to pay tax earlier if they have PAYE income compared with someone who is wholly under self-assessment.

On the one hand, collecting tax closer to when it is earned seems reasonable. But on the other, this creates a two-tier system whereby two people with similar incomes, but from different sources, may face very different payment dates. Questions are already being asked about how this fits in with HMRC’s Charter promise to treat taxpayers fairly. There are also concerns that the system will create cash flow problems for seasonal businesses. A consultation will be launched in 2026 which will hopefully address some problems. A cynic may be forgiven for suspecting that this may be used as a stick to beat smaller businesses into Making Tax Digital voluntarily, e.g. by making quarterly updates the only way codes can be updated for expected income in-year. Let’s hope that isn’t the case.