Now more than ever, many people are starting a side hustle to make extra income. Side jobs provide people with the opportunity to pursue their passions, comfortably pay for their finances, or simply explore alternative avenues outside their primary occupation.
However, as the side hustle trend continues to grow in popularity, the new rules state that it has recently become mandatory to pay tax on your side job.
This blog post explores the complexities of side hustle tax and the debates surrounding it. Keep reading for more information.
What is Side Hustle Tax?
Side hustle tax refers to the taxes charged on income generated through secondary employment, freelance work, or any additional money beyond one’s main job.
The tax allowance obligations associated with a side hustle mainly depend on the amount of income generated. In the UK, individuals are entitled to a tax-free allowance, which means they can earn a certain amount before they have to pay income tax.
However, any income earned beyond this threshold is subject to taxation. This applies to both primary and secondary sources of income.
What Are the Debates Associated With Side Hustle Tax?
The controversy surrounding the Side Hustle Tax stems from the perception that it may discourage people from engaging in additional income-generating activities.
Many argue that imposing taxes on side hustles could act as a barrier for those seeking financial flexibility or exploring their entrepreneurial spirit.
One key point of conflict revolves around the administrative burden placed on individuals with side hustles. Managing taxes for a primary job is challenging enough, and adding the complexities of multiple income streams can be overwhelming.
Critics claim that the additional paperwork and record-keeping requirements might prevent people from pursuing side hustles altogether.
Moreover, there is concern that taxing side hustles disproportionately affects those with lower incomes, who often engage in such activities to make ends meet.
Advocates for fair taxation argue that the government should consider policies encouraging entrepreneurship and the pursuit of additional income without unduly burdening individuals financially.
The Legalities Associated With Side Hustle Tax
To get a clearer perspective on the Side Hustle Tax controversy, it is essential to understand the legal framework governing taxation in the UK. Her Majesty’s Revenue and Customs (HMRC) oversees the taxation system, ensuring compliance with the law.
In the UK, the tax rates are progressive, meaning people with higher incomes face higher tax rates. The tax bands are structured to accommodate different income levels, and any income beyond the tax-free allowance is subject to taxation at varying rates.
For side hustles, the key lies in accurately reporting income and expenses. Failure to do so can result in legal repercussions, including fines and penalties. If you receive income of more than £1000 a year, you will need to send a self-assessment tax return.
This has prompted calls for simplified tax procedures and increased support for those dealing with taxation and multiple income sources.
How to Deal With Side Hustle Tax
If you have a side job, understanding the tax obligations and tax rules associated with it is important. Seeking professional advice or utilising digital tools designed to simplify tax calculations can go a long way in ensuring compliance and minimising stress.
Tailoring tax policies to accommodate the unique challenges and opportunities presented by secondary income streams could address some of the controversies surrounding the side hustle tax.
As discussions around the Side Hustle Tax continue, it is clear that finding a balanced approach is essential.
Paying business tax for your side job may be controversial, but it is a reflection of the changing dynamics of employment and income generation.
Balancing the need for government revenue with the desire to provide a vibrant and entrepreneurial workforce requires careful consideration and ongoing discussions.
As individuals continue to explore the world of side jobs, the debate around taxation will likely remain a focus point in shaping the future of work and finance in the UK.
Stay on Top of Your Taxes With LJS Accounting Services
Here at LJS Accounting Services, we offer all of our customers excellent accounting services in Liverpool and surrounding areas.
Running a business can be stressful enough, especially when it comes to dealing with taxes, which is why we are here to help. Our VAT and bookkeeping services allow you to stay on top of your taxes without missing any deadlines.
We can prepare and submit your VAT returns to the HMRC by the statutory deadline and offer training to you over time to allow you to control your bookkeeping in-house.
For more information on the services we offer or to speak to a member of our team, don’t hesitate to contact us today at 0151 601 0000, we are more than happy to help.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
