How a Recent Tax Change Impacts Reporting Side Hustle Income

With most of the media focused on the headline-grabbing announcements from the Budget, a read of the published small print reveals another change coming in 2029. It’s bad news if you are an employee with a side hustle, particularly when it comes to reporting side hustle income, but what’s going on? 

Side Hustles and HMRC’s Focus on Tax Reporting

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 side hustle tax reporting receiving increased attention from HMRC. With an ongoing cost-of-living crisis, it’s not surprising that people are looking to boost their household income by having small businesses. 

How Mandatory PAYE Will Change Side Hustle Tax Reporting

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 30th 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 but also estimate the current year’s liability, forcing those with side hustles to pay tax earlier if they have PAYE income compared to someone who is wholly under self-assessment.

Cash Flow and Fairness Issues Around Tax on Second Income

On the one hand, collecting tax closer to when it is earned seems reasonable. But on the other hand, 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 raised about how this aligns with HMRC’s commitment to treat taxpayers fairly under its Charter . 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.

What This Means for Declaring Extra Income to HMRC

If recent changes have raised questions about reporting side hustle income, it’s worth getting clarity before new rules take effect. Understanding how and when tax may be collected can help you avoid surprises and plan with confidence. For many taxpayers, this raises practical questions about declaring extra income, HMRC requirements and how these may change once PAYE adjustments become mandatory.

Getting Advice on Reporting Side Hustle Income Going Forward

At Freeman Carr, we regularly advise individuals and business owners on how side income is treated and what practical steps may be needed. If you’d like guidance custom to your situation, speak to a specialist who can explain the implications clearly and help you decide what to do next.