Most Googled questions about your side hustle
With furlough leaving many people 20% worse off than they were pre-pandemic, there has been an increase in people seeking alternative ways to make up that loss of money. In fact, it is estimated that side hustles contribute over £72 billion to the UK economy!
A side hustle can be a great way to build up some extra income. Oliver Atkinson, Chartered Accountant from Atkinsons Charactered Accountancy answers the most Googled questions about side hustles and explains the legalities and realities of making an extra income.
Do I need to pay tax for my side hustle?
Whether your side hustle involves crafting and selling accessories online, freelance writing or renting out a spare bedroom, once you start making money on your hustle it can be easy to forget the legalities of having this extra income. “Income earned from a side hustle is untaxed, so needs to be reported to HMRC,” Oliver Atkinson, Chartered Accountant explains. “Failing to do so can result in huge fines and interest on late payments.”
Everyone in the UK is allowed up to £1,000 allowance of additional income before they need to report it. As soon as you earn over £1,000 in the tax year you must submit a Self-Assessment tax return. “Filling out a Self-Assessment tax return is relatively straight-forward,” Atkinson explains. “However, you need to ensure you keep records for your side hustle, such as bank statements and receipts, and ensure you fill the form out before the deadline.”
Additionally, it's worth noting that there are ongoing changes in tax regulations, with the introduction of initiatives like "Making Tax Digital for Corporation Tax" on the horizon. Staying informed about such developments is crucial for individuals engaged in side hustles, as compliance requirements may evolve, impacting the way income is reported and managed.
How to start a side hustle
A side hustle is an additional job or “gig” which is taken alongside primary and typically full-time work. Many take on a side hustle if their 9-5 doesn’t provide enough financial freedom, or if they have a hobby or talent which they would like to pursue. “Starting a side hustle is usually the biggest step to take, but the benefits can be really rewarding,” Atkinson explains. “Even so, there are many websites and online services which make setting up your side job easily.”
Atkinson continues “begin by identifying what you can feasible manage and maintain, especially if you still have a full-time job which takes up a lot of your time. If in your free time you enjoy crafting and creating goods, then selling online is a great option as it is way to combine your hobby with making money. If you don’t have much time, however you have a spare bedroom which is collecting dust, then renting out this space to solo travellers, or even longer-term agreements with students for explain, can mean a more consistent income with less effort needed on your part.”
Do I need a business license for my side job?
If you are just getting started and making under the £1,000 income threshold with your side job, then you do not need to register your business with HMRC. As soon as the money you make goes above £1,000 then you must register your business and yourself as Self-Employed with HMRC.
As soon as you have registered your side hustle with HMRC you will need to pay the following self-employment taxes on your business profits:
- Income Tax
- Class 2 and Class 4 National Insurance
Can I have a side job alongside a full-time job?
In a short answer – yes, you are able to have a side job alongside a full-time PAYE job, however this isn’t a decision to rush into. “Check your full-time contract to see whether you are actually allowed to take on a second job,” Atkinson advises. “Some companies forbid working two jobs for various reasons. If your side hustle is in a similar industry to your full-time work, then it could be seen as a conflict of interest.”
How to grow your side hustle
Once your side hustle is up and running, you will want to boost its potential and start expanding and growing your business. Below, Atkinson offers a step-by-step guide to develop your side hustle:
- Plan efficiently: make sure you have enough time to sufficiently grow your side hustle. If you are noticing orders going up yet you don’t have time to fulfil them, this will reflect poorly on your business. Make sure you set manageable goals which can be maintained.
- Work/Life balance: it can be really exciting when your business begins to make more money, however working a side hustle alongside a full-time job can be tiring, so ensure you don’t stetch yourself too thin.
- Ask for help: managing tax forms, tax deadlines and bank statements can require a lot of energy. Once your side hustle is stable and making money, seeking help from an Accountant can make your life easier as they are in charge of consolidating all of your information and making sure you don’t miss vital deadlines.
Keep up with the top stories from Reader’s Digest by subscribing to our weekly newsletter.
Loading up next...