With summer coming soon, many people are looking for ways to earn some extra cash.
Many people don’t know that this goes towards their tax-free allowance and needs to be reported to HMRC.
Side hustles are becoming increasingly more popular for people nowadays to earn some extra money to combat the cost of living. Selling clothes on Vinted, posting on TikTok and dog walking are all common side hustles.
However, the revenue from a side hustle can quickly catch up to you. This could result in a nasty tax bill if you don’t tell HMRC your revenue correctly.
What do side hustlers pay tax on?
All money that is made through a side hustle should be reported to HMRC if it is above £1,000.
HMRC treats revenue from digital platforms the same as they do income from a business. While many side hustles don’t require you to pay tax, online side hustles tend to make more money due to their multiple revenue streams.
Small businesses and side hustles are not just online, so reporting taxes correctly through HMRC is essential for all side hustles.
An example of this could be an at-home baker who makes cakes for an honesty stand. The revenue made should be reported to HMRC, as the revenue still contributes to your tax-free allowance.
If your side hustle does well and ends up as a main hustle, or if you have other forms of income, you may be required to pay tax on anything you earn over the Personal Allowance of £12,570.
How to file taxes as a side hustler?
Many people who are a part of the side hustling community may have only ever worked PAYE jobs where tax is sorted behind the scenes, but a side hustle requires you to be on it with your tax.
The first step is to calculate your gross income, which combines money from all side hustles you may have.
If the amount is under £1,000, you don’t have to do anything – it doesn’t need to be registered or reported.
If the amount is between £1,000 and £3,000, you must pay tax on this income, but you do not need to file a full tax return. Log in to your HMRC Personal Tax Account to report your earnings through the new online service.
If the total of your amount is over £3,000, you must register as a sole trader, register for Self Assessment and file an annual tax return.
Should your side hustle take your earnings over £12,570, the Personal Allowance threshold, you will have to begin paying tax on your earnings over that threshold.
When establishing a side hustle, people often forget about the tax implications of having another revenue stream and think they don’t need to report it to HMRC.
This is not true. If you fail to report any earnings to HMRC, you could be left with a hefty fine for an overdue tax bill.
Planning ahead of your tax bill will help you stay informed on financial decisions. If you are a side hustler and need help with your taxes, get in touch with our dedicated team today to help you plan your tax contributions.
Let us hustle you to get in contact today for support with your tax.
