Side Hustle: Do You Have To Pay Tax On It?

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Do you have a great business idea, but you are not yet ready to embark on it? This is the case for many people across the UK, with Credit Karma estimating that around 25% of adults have more than one job.

With the cost of living rising and entrepreneurship in the air among young women, questions about the logistics of starting your own business in addition to your full-time job are common, and answers may seem elusive.

This week, I’m going to go over some of the more common queries and explain how the side pushing works in practice:

Do I have to pay taxes on my side activity?

Basically yes, but if you earn less than £ 1000 in a fiscal year it is not considered taxable and you will not have to sign up for the self-assessment. As soon as you earn above that threshold, craft jewelry from your bedroom, or do a bit of writing in parallel, you’ll need to start paying taxes.

Oliver Atkinson, Atkinsons Chartered Accountants, says: “Completing a self-assessment tax return is relatively straightforward. However, you should make sure to keep records for your side activity, such as bank statements and receipts, and make sure you complete the form before the deadline.

Failure to do so can result in hefty fines, he warns. So it’s best to keep an eye on your extra income and make sure you’re ready when it gets close to that threshold.

How can I start my secondary activity?

If you are ready to get started and have a passion or hobby that you would like to pursue, then now is the time to think about starting your business – exciting!

The first recommendation is to create a separate bank account to receive payments immediately: this creates a clear audit trail and will help you separate your freelance income from your main income. It will also allow you to start saving for tax without all your money getting tangled up, which is easy to do and can get things very confusing very quickly.

If you are selling a product, make sure that this account is where your income is paid and include that account details on any invoices you send.

Liz Ogabi, founder of For Working Ladies and author of Side Hustle in progress, says it’s also good to have a goal for your team up front. “At the start of a secondary activity, I would know very clearly what you want to do with it,” she advises. “Do you still want it to be a side business or maybe one day your main business?” In the latter case, create a plan on how you can get there.

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Do i need a commercial license?

As soon as you start earning around that £ 1,000 threshold that we mentioned earlier, you will need to register your business with HMRC. It’s not as scary as it sounds, and can be done very quickly.



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