We’re in the middle of a cost of living crisis, the price of everything is going up while our wages are staying the same and it’s put a strain on us all in so many ways. With finances being so tight, many people are looking at ways to earn a little bit of extra money and with the accessibility of the internet it means that side hustles are a great way to do this. From blogging to freelance writing, reselling items, designing, making and selling crafts and so much more there’s loads of opportunities regardless of your skillset. But there are some things to bear in mind when it comes to the legalities, read on to find out more.
Registering Your Side Hustle and Getting The Right Paperwork
Depending on the nature and scale of your side hustle, you might need to register your venture with the appropriate authorities. This could involve obtaining a business license or registering as a sole trader. If you’re working with food for example you will need the right hygiene certificates, and many kinds of business will need liability insurance in case anything goes wrong. Research the requirements in your area and to do with your specific venture to make sure that you’re compliant from the start.
Separating Personal and Business Finances
Open a separate bank account for your side hustle to track income and expenses accurately. This separation streamlines your financial management and also aids in the smooth filing of your self assessment tax return. Detailed and accurate record keeping is key to managing the financial aspects of your side hustle. Keep track of all income, expenses, receipts, and invoices. You can make use of accounting software or apps to simplify this, which gives you a comprehensive financial trail come tax season.
Understanding Self-Assessment:
Setting up as self employed is really easy, and it’s something you can do even if you already have a full time job with a company who pay taxes on your behalf. If you have a hobby or side hustle that earns you money, you have to declare it through self assessment even if you’re not earning enough to pay any tax on it. Simply go onto the Gov website and search self assessment, fill in the forms and it’s as easy as that. Each year you’ll just need to declare how much profit you’ve earned. Everyone in the UK gets a personal tax allowance, for this year it’s £12,570. This means that you dont pay any tax until you earn over this amount, but bear in mind that income from all of your jobs is included in this. So if you already earn over this in your day job, you’ll pay tax on profits from your side hustle right away. It’s important to take advantage of allowable business expenses to reduce your taxable income. This could include costs related to running your side hustle, such as office supplies, equipment, or travel expenses. Always keep receipts and documentation to support these deductions when filing your self-assessment, and if you’re not sure it can be worth hiring an accountant to deal with it all for you.