The move has raised concerns among accountants, with some warning that Brits will need to check their tax code regularly or risk paying too much.
The change has gone almost completely under the radar. (Image: Getty)
A major tax change announced in the Budget has largely gone under the radar, and experts warn that it could leave workers paying tax on money they have not yet earned. The plan affects people who have a full-time job but also earn extra income on the side. From April 2029, thousands of workers with side hustles will see tax deducted from their PAYE code in real-time, rather than settling their bill at the end of the tax year.
The change means HMRC will collect tax on projected earnings instead of waiting for people to submit their self-assessment, a move that has raised concerns among accountants. Mike Warburton, a former tax director at Grant Thornton, said the change could be “fundamentally unfair” for anyone whose income varies during the year.
The plan affects people who have a full-time job but also earn extra income on the side (Image: Getty)
He told The Telegraph: “You might make all your money over Christmas but get asked to pay tax throughout the whole year. So it’s a tax on income you haven’t earned yet, which is fundamentally unfair.”
He also warned that the policy appears to be designed solely to bring money into the Treasury more quickly, without considering its impact on workers.
He said: “This is another idea dreamt up by people sitting in Whitehall to try to get more cash in sooner, without thinking through the implications for taxpayers.”
At the moment, employees pay tax through PAYE and the self-employed pay through a tax return.
Workers who perform both roles can opt to have their self-assessment collected through their code, provided they owe less than £3,000.
Critics warn that the policy seems designed simply to bring money into the Treasury more quickly. (Image: Getty)
The Budget change would widen this sharply. Far more people with small self-employment incomes, everything from online selling and freelancing to seasonal work, would have their extra tax taken automatically through PAYE.
The Treasury expects it to raise around £925 million through what it calls “timelier” tax collection and preventing people from falling into debt with HMRC.
However, the way the system will work has triggered new concerns. PAYE deductions will be based on what someone owed the previous year, even if their side-hustle income drops.
Chris Etherington, from accountancy firm RSM, said: “Those with extra income that fluctuates each year will likely need to keep a closer eye on their PAYE coding notices, or risk overpaying amounts to HMRC.”
Many self-employed people do not know their profit until the end of the tax year, meaning any overpayment could turn into a long wait for a refund.
Some workers have already reported delays of several months when trying to get money back from HMRC.
Mr Warburton added: “I have no confidence in HMRC being able to make refunds in good time.”
HMRC said taxpayers will be able to adjust their forecast during the year if they know their actual bill will be lower, and a safeguard preventing PAYE deductions from exceeding 50% of a worker’s PAYE income will remain in place.
A consultation on the change will be published in early 2026.
