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What is Side Hustle Tax And is it Controversial?

What is Side Hustle Tax And is it Controversial?

Do you have a side job to bring in some extra income but are unsure what side hustle tax is? If so, you’re not alone!

Side jobs can provide you with the opportunity to pursue your passions, comfortably pay for your finances, or simply explore alternative job options outside your primary job role.

However, as more people are deciding to pursue a side job, rules now state that it has recently become mandatory to pay tax on your side job according to the HMRC.

Throughout this blog, we will explore the complexities of side hustle tax and the debates surrounding it. Keep reading for more information.

 

What is Side Hustle Tax?

Before we discuss whether or not the side hustle tax is controversial, let’s explore what side hustle tax is.

Side hustle tax refers to the taxes charged on income made through secondary employment, freelance work, or any additional money beyond your main job. Some examples of side hustles are:

  • Crafting handmade goods
  • Selling products, such as paintings or jewellery
  • Dog walking

 

The tax allowance obligations associated with a side hustle mainly depend on the amount of income you make. In the UK, individuals are entitled to a tax-free allowance, which means they can earn £12,570 before they have to pay income tax.

Any income earned beyond this threshold is subject to taxation. This applies to both primary and secondary sources of income.

 

Pros and Cons of a Side Hustle

Many people decide to start a side hustle for many reasons, such as:

  • To earn more money (financial security)
  • To become their own boss and work their own hours
  • To pursue a dream of theirs

 

There are many benefits of starting a side hustle; however, it is important to remember that there are some risks and cons to consider before starting your side hustle. Keep reading for the pros and cons associated with a side hustle.

 

Pros

1: Financial Stability

As briefly discussed before, a side hustle can provide you with financial stability by increasing your income allowing you to live a comfortable lifestyle and pay off any debts you may have.

However, it is important to remember that it can take a while for a business to do well, which is why perseverance and dedication are key.

 

2: Flexibility

A side hustle can provide you with more flexibility as you are your own boss and you decide your own hours. This can be a huge benefit for people looking for a healthy work-life balance.

 

3: Pursuing Your Passion

More often than not, people start a side hustle to pursue their dreams or to bring an idea to life. This allows them to enjoy working as it is something that they have a strong passion for.

Did you know on average, most people spend around 90,000 hours of their life working?

This is why it is so important to pursue a job that you enjoy so it feels less like a chore and more like a hobby that you enjoy!

 

Cons

1: Initial Investment Costs

Starting a side hustle can be a thrilling and exciting experience, however, it is important to consider the initial investment costs of running your business.

This is why it is important that you keep your main job as your main source of income because these initial costs are likely to come out of your own pocket.

However, don’t be disheartened if your business doesn’t take off straight away. Stay motivated and set realistic expectations. You can do whatever you put your mind to!

 

2: Tax Obligations

As you know, a side hustle can cause you to pay more tax depending on how much money you make. Make sure that you have a thorough understanding of the tax obligations associated with starting a side business!

 

3: Time Management Challenges

Balancing a side job with a full-time job can be difficult and finding the time to work on your side hustle can feel overwhelming. However, it is important to set time to work on your side job so that one day you can transfer into your side hustle for good if you wish to.

Remember, hard work pays off!

 

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 starting a side hustle.

Many argue that imposing taxes on side hustles could act as a barrier for those seeking financial flexibility and prevent people from trying new things.

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 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 burdening individuals financially.

 

The Legalities Associated With Side Hustle Tax

To get a clearer understanding of the Side Hustle Tax controversy, it is important for you to understand the legal framework controlling 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.

 

Do I Need to Pay Tax on My Side Hustle?

Simply put, you can earn up to £12,570 across all income sources, such as salary, side hustles, and investments, without paying any income tax. This is referred to as personal allowance.

However, there is a trading allowance of £1,000 specifically for side hustle income. For example, if your gross income from your side job is £1,000 or less, then you will not need to report this to the HMRC nor pay tax on it.

If you are unsure whether or not you need to pay tax on your side job, make sure to check with the HMRC.

 

How to Deal With Side Hustle Tax

If you have a side job, it is important that you understand the tax obligations and tax rules associated with it. Seeking professional advice or making the most of digital tools designed to simplify tax calculations can help to ensure compliance and minimise stress.

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.

As people 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.

Have You Got Any Questions?

Need to talk to someone? Get in touch with one of our consultants today and we will be happy to help.
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