Side hustle
Does Side Hustle Income Affect My Tax Code?
Written by Waqas Sagar ACA FCCA FMAAT · Chartered Accountant · Last reviewed 22 October 2026
How it works
Coding out reduces your tax-free amount at work, so a little more tax comes out of each payslip.
You must file online by 30 December to use coding out for that year's balance.
If you prefer, pay directly by 31 January and your code stays unchanged.
Payments on account
Coding out the balance does not stop payments on account if your bill is over £1,000 and less than 80% was collected at source.
Check your new tax code when it arrives — mistakes are common.
If your side income stops, tell HMRC so they update your code.
According to Waqas Sagar, Chartered Accountant at influencers.accountants, coding out spreads the cost, but paying directly keeps your payslip simple.
Example
Ella owes £1,200 on her side income. She files by 30 December and opts to code it out. Her tax code drops slightly and about £100 a month is collected from her pay.
Illustrative figures only, based on 2026/27 rules.
What you need to do
- File early.
- Decide whether to code out.
- Check your new code.
- Update HMRC if income changes.
Want us to handle this for you? Our Self Employed Starter package covers registration, your Self Assessment return and expense review. See also our side hustle tax help and our page for side-hustle tax checker.
Common mistakes
- 1Missing the 30 December cut-off.
- 2Not checking new codes.
- 3Assuming coding out removes payments on account.
From our client work: We often see coding-out errors that collect tax twice — easily fixed if spotted.
Frequently asked questions
Related questions
Official sources
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This is general guidance for UK tax residents for the 2026/27 tax year, not personal advice. Speak to us about your situation.
