Side Hustle Tax Changes: What Kent Entrepreneurs Need to Know

The Government is consulting on major changes to how tax is collected from people who earn extra income alongside employment, including freelancers, sole traders and side-hustle businesses.

Under the current system, individuals report their profits through Self Assessment and can choose how they pay any tax due. However, from April 2029, HMRC is proposing to automatically collect tax owed through PAYE tax codes, meaning deductions would be taken directly from wages or pensions throughout the year.

HMRC estimates around two million people could be affected. Supporters argue the change will reduce late tax payments and improve tax collection. Critics, however, are concerned that it could create cash flow pressures for start-ups and small businesses, particularly those in the early stages of growth, by taking tax from earnings before business owners have received or reinvested profits.

The proposals also come alongside the expansion of Making Tax Digital requirements, increasing the administrative burden on many sole traders.

For anyone running a business alongside employment—or considering starting one—these changes could have a significant impact. The Government is currently seeking views before finalising its plans.

📢 Have your say: The consultation closes on 4 August 2026.

• https://www.gov.uk/government/consultations/timely-payments-in-income-tax-self-assessment

• https://consult.tax.service.gov.uk/making-tax-digital/timely-payment-of-income-tax/

At The Kent Foundation, we encourage entrepreneurs and side-hustle business owners to review the proposals and consider submitting their views, particularly if the changes could affect your ability to start or grow a business.