Subscribe to our newsletter to receive business tips, learn about new funding programmes, join upcoming events, take e-learning courses, and more.
Take the first step to successfully starting and growing your business.
Join for free)
Posted: Tue 4th Aug 2026
5 min read
Last month, we discussed the government's plan to take tax on side hustles from founders' PAYE day-job salaries.
If you run a side hustle, from April 2029 HMRC plans to estimate what tax you owe and, via tax codes, take it from your monthly pay before you've earned it.
Chartered accountant and Enterprise Nation adviser Paula Tomlinson warns this could squeeze the cash flow of anyone whose income is seasonal or unpredictable – which is likely to be most side hustlers.
According to our StartUp Ambition Report 2026, 56% of prospective founders plan to start a business part-time alongside their job and caring responsibilities, with 36% starting up specifically to keep pace with rising costs.
At Enterprise Nation, we've now submitted a full response to the government's consultation on behalf of our community.
The new rules will apply to around 2.1 million people who file a Self Assessment return and also have a job or pension.
The government's case is that around one in five Self Assessment payments arrives late, and that tax can currently fall due up to 22 months after the income was earned.
The total tax you owe doesn't change. What changes is when you pay it, and who controls the timing.
The government consultation also floated going further, asking whether:
people without PAYE income should pay more frequently too
the £1,000 threshold for payments on account should come down
This would effectively bring the smallest side hustles into paying their estimated tax in advance.
Once introduced, this system could create a huge pain point where people could find themselves paying tax twice.
In 2029/2030, they would pay what they owe for the previous year under the old rules while the new deductions begin coming out of their wages, a squeeze that Enterprise Nation members have called a "double hit".
For those founders, the wage from the day job is the safety net that makes starting a side hustle possible.
Deducting an estimated amount of tax from it, based on the previous year's figures, takes working capital from businesses at the moment they need it most.
A changed tax code can also reveal to an employer that an employee has a business on the side. For some people, that alone is reason enough never to start.
The consultation asked 27 questions, covering:
how forecasts should work
what safeguards taxpayers need
how employers will cope
how the transition should run
whether the scheme should expand its scope
We answered all of them and made our position plain. Mandatory in-year collection is the wrong reform for this group of business owners.
We argued that HMRC could achieve the same goal – tax paid on time – by promoting the voluntary tools that already exist, with compulsion reserved for repeat late-payers.
People can already choose to pay through their tax code. The case for removing that choice has not been made.
Should the scheme go ahead regardless, we set out the safeguards it must include.
New businesses should be exempt for their first two years. The average prospective side-hustler expects to earn £7,034 in their first year. Deducting estimated tax from wages against such a small and uncertain income will stop some businesses starting at all.
Anyone should be able to pay by direct debit instead, so no side business is ever disclosed through a payslip. Correcting an incorrect forecast must be quick, and done online through a "self-serve" tool. Because a system that relies on phoning HMRC will fail the people it's meant to protect.
No cut to the £1,000 threshold. The government has previously signalled it would take up to 300,000 low-income traders out of tax returns altogether. Pulling the smallest earners into advance payment would move in exactly the opposite direction.
Financial practitioners and professional tax bodies share many of our concerns.
On AccountingWEB, an online community of accounting and finance professionals, people have called the plan a "sledgehammer to crack a nut", with deductions potentially based on a tax position two years old.
When the idea was first tested in 2021, the Association of Taxation Technicians argued any change should be optional and driven by incentives rather than compulsion.
The ICAEW's Tax Faculty is among those responding this time round.
The government will publish its response in Autumn 2026, with legislation to follow in a Finance Bill before 2029. Nothing changes for your tax affairs yet.
Enterprise Nation will keep making the case in the meantime. We're raising this directly with the new team of government ministers, so the voices of the founders it affects are heard where the decisions get made.
If this change would hit your business, let us know. Your experiences are the evidence that carries weight.
