Most media coverage of the recent Budget has focused on the headline announcements. However, a close reading of the fine print reveals a significant – and largely overlooked – change due to take effect from 2029. It’s unwelcome news for employees who also run a side business, so what exactly is changing?
The background: PAYE, side hustles and the so-called “eBay tax”
Side hustles and online selling have been under significant scrutiny in recent years, with digital platforms now required to report seller information to HMRC. Despite the headlines, there is no new “eBay tax” – taxpayers are simply being brought within existing rules.
Under current self-assessment rules, an employee with additional untaxed income (for example from a small business) can choose to have any balancing payment of up to £3,000 collected through an adjustment to their PAYE tax code. This is optional, and only available if the tax return is filed by 30 December following the end of the tax year. Otherwise, the balancing payment is due via the standard self-assessment deadlines.
What changes in 2029?
From the 2029/30 tax year onwards, HMRC plans to make PAYE coding adjustments mandatory for eligible taxpayers. Crucially, the change goes even further: the first year of the new system will not only collect any underpayment from the prior year but will also collect an estimated liability for the current year.
For employees with side businesses, this means tax will be paid earlier than under the existing framework—potentially much earlier than someone with similar income who is wholly within self-assessment.
A fairer system or a two-tier approach?
On one hand, collecting tax closer to when the income is earned may seem sensible. On the other, it raises questions about fairness and equality of treatment. Two individuals with comparable earnings could be required to pay their tax on very different timetables depending solely on whether their income is taxed through PAYE or self-assessment.
This discrepancy has prompted concerns about compliance with HMRC’s own Charter, which promises to treat taxpayers fairly. Seasonal businesses may also face cash-flow strain if tax is collected before their peak trading periods.
What happens next?
A consultation is expected in 2026, and it will be important for HMRC to address the practicalities and potential unintended consequences. There is also speculation that the reform could encourage—directly or indirectly—wider adoption of Making Tax Digital, for example by tying accurate PAYE code adjustments to the submission of quarterly updates.
Whether that materialises remains to be seen, but many will hope the eventual design avoids disproportionate burdens on smaller and part-time businesses.