Got a great business idea, but not ready to embrace the side hustle just yet? This is the case for lots of 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 entrepreneurial spirit in the air among young women, questions about the logistics of setting up your own business on the side of your full time job are common, and the answers can feel elusive.
This week, I’ll be running through some of the most common queries and explaining how side-hustling works in practice:
Do I have to pay tax on my side hustle?
Essentially, yes – though if you earn under £1,000 in one tax year, this is not considered taxable and you won’t have to register for self assessment. As soon as you earn above this threshold, whether you’re making jewellery from your bedroom or doing a bit of copywriting on the side, you’ll need to start paying tax.
Oliver Atkinson, of Atkinsons Chartered Accountants, says, “Filling out a Self-Assessment tax return is relatively straight-forward. 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.”
Not doing so can result in hefty fines, he warns – so it’s best to keep an eye on your extra income and ensure that you’re prepared when it starts nearing that threshold.
How do I start my side hustle?
If you’re ready to get started and have a passion or hobby that you’d like to pursue, then it’s time to think about starting your business – exciting!
The first recommendation is to create a separate bank account to receive payments right away: this creates a clear audit trail and will help you to separate your self-employed income from your main income. It will also enable you to start saving for tax without all of your money becoming muddled together, which is easily done and can make things very confusing, very quickly.
If you’re selling a product, make sure this account is where your revenue is paid, and include the details for this account on any invoices you send out.
Liz Ogabi, founder of For Working Ladies and author of Side Hustle In Progress, says that it’s also good to have a goal for your side hustle from the outset. “When starting a side hustle, I’d get really clear on what you want to achieve with it,” she advises. “Do you always want it to be a side hustle or maybe one day your main hustle? If the latter then create a plan as to how you can make that happen.”
Do I need a business license?
As soon as you start earning about that £1,000 threshold that we mentioned previously, you’ll need to register your business with HMRC. This isn’t as scary as it sounds, and can be done very quickly.