Having a side hustle and paying tax come hand in hand. If you’re making extra money from using your skills in a side hustle you need to know what happens when it comes to paying tax. This guide will help you.
What is a side hustle?
A side hustle is considered to be a secondary job or small business. This gives the possibility to bring in extra cash. Many people use side hustles not only for financial incentives but also for personal development. It can mean fulfilling entrepreneurial goals and provides the opportunity to try out working in other industries.
What are some examples of a side hustle?
The online world has created a really exciting platform for hosting a side hustle. Websites allow freelancing and selling crafts really easy. Some examples of a side hustle are:
*Being an influencer on social media
*Designing graphics
*Baking
*Creating crafts
You need to know about the trading allowance
The trading allowance lets you earn up to £1,000 of trading income each financial tax year and not pay tax on this income. You don’t even need to let the tax man know you’re making this money. If your income from your side hustle exceeds the £1000 limit then you will have to register for self-assessment and let HRMC know.
This was originally created to allow people to sell on platforms like eBay. It also covers the sale of goods or services, so you can make money from side hustles like being a blogger, a baker or a babysitter.
You need to keep documentation for your side hustle and paying tax
Many side hustlers start as freelancers or sole traders, meaning income tax will be calculated on total earnings. You’ll pay tax on the amount over the personal allowance, and for the 2020/21 tax year, the personal allowance is £12,570. If you make below this amount between your day job and side hustle, you won’t have to pay income tax on your earnings.
In order to file your self-assessment tax return, it is essential to document all incomings and outgoings through bookkeeping and utilising software for small businesses.
Outsource your taxes involving your side hustle
Outsourcing your taxes involving your side hustle can make sure things are done accurately. We can help you file your self-assessment tax return. If you’d like help with taxes on your side hustle contact us.
