Side hustles are everywhere these days – it feels like almost everyone has one. If you’re thinking it might be your turn to earn a little extra on the side, you’re in the right place. In this blog we’ll explore popular side hustle ideas, how much you can earn tax-free, and explain how tax works if your earnings go over the allowance.

What counts as a side hustle?

A side hustle is literally just that – income that you earn on the side of your main job or studies. For example, you may be in university full-time and work as a delivery driver on evenings and weekends – or you could be in full-time employment, offering online tutoring after hours.

Do I need to pay tax on my side hustle?

It depends. Everyone is entitled to the £1,000 trading allowance so if your side-hustle earnings are less than that, there’s no need to tell HMRC or pay any taxes.

Above that you’ll need to sign up with HMRC and tell them about your earnings so they can work out how much tax you owe.

How do I tell HMRC about my side hustle?

The way you report your side-hustle to HMRC depends on what sort of business structure you choose to operate under.

• You could sign up as a sole trader and report your earnings through Self Assessment or through MTD Income Tax (depending on how much you earn!)
• A limited company is a bit more complex; you’ll need to register your company with Companies House, and pay Corporation Tax

What are the best side hustle ideas?

There are countless options to choose from – you can even create a super-niche side hustle if there’s demand for it. For example, if you live in an area with dog pageants, you could design and sell custom pet costumes.

Just in case you don’t want to go that niche, here are a few more popular ones to consider:

• Freelancing (like writing, editing, graphic design etc)
• Content creation
• Virtual assistant
• Affiliate marketing (this is very popular at the minute, especially on TikTok Shop)
• Selling digital products
• Delivery jobs
• Tutoring or coaching
• Starting up your own ecommerce business
• Dog walking or pet sitting
• Asset-based side hustles like renting out a room on Airbnb

A good tip is to think about what you love. For example, let’s say you crochet. Could you create crochet bags and sell them online? Or if you love dogs, would you be a great pet sitter? It all depends on your skill set.

Do I need money to set up a side hustle?

No – you don’t always need money to set up a side hustle. It depends on what you’ve chosen to do. For example, if you already have a laptop, you can start freelance writing, editing, and even sell digital products if you use free platforms.

Money will be needed if you need to purchase specific tools, software, or materials – you also might need insurance depending on what you’ve chosen to do.

The good thing is, anything bought exclusively for your business is classed as a business expense, meaning it’ll be deducted from your profit, reducing your taxable income when you complete your tax return. So, whilst you may have to take the hit now, it means paying less in tax in the long run – just make sure this is recorded properly in your bookkeeping!

How do I find customers?

It depends on what you’re looking for. For example, someone looking to provide freelance digital services to clients may look at using Fiverr or Upwork.

Whereas someone selling goods, or digital products may use the likes of eBay and Etsy. It’s important to think about where your audience is based, whether you need a website, and what social media channels (if any) you could use to highlight the work you’re offering.

Getting paid when running a side hustle

There are several ways you can ask your clients to pay, for example:

• Bank transfer (usually the most common for freelancers, you just need to provide your sort code & account number in your invoice)
• PayPal/Stripe
• Wise
• Revolut Business
• Direct debit (good if you have recurring payments from clients or customers)
• Through a platform (for example, eBay, Etsy, Fiverr etc. will accept and hold the funds, and deduct a fee before they pay you)

To ensure your invoice gets paid, it’s better to offer multiple ways to pay – and always put a contract or agreement in place if you’re providing services so your customers know what to expect.

Should I open a business bank account?

It’s only compulsory to open a business bank account if you’re a limited company. But it’s good practice to do this anyway so you don’t get your personal and business expenses mixed up.

If you do decide to open one, make sure you choose one that’s as efficient as possible – checking things like interest rates and charges, withdrawal fees and transaction fees.

Is side hustle income treated differently in Scotland vs the rest of the UK?

The way side hustle income is reported to HMRC is the same across the UK. You’ll still benefit from the £1,000 trading allowance, and if you earn over this you’ll need to register and report your income via Self Assessment.

The key difference is that Scottish taxpayers pay different income tax rates and bands on non-savings income, which includes side hustle profits. This means you may pay a slightly higher or lower rate of income tax compared to someone earning the same amount elsewhere in the UK.

National Insurance rates are the same across the UK, and Corporation Tax is also UK-wide, so these won’t differ for Scottish side hustlers.

If you’re unsure whether you’re classed as a Scottish taxpayer, HMRC determines this based on where your main home is located during the tax year.

What happens if I don’t report my side hustle to HMRC?

If you don’t report your side hustle income to HMRC, and you’ve earned over the trading allowance, you could risk penalties, fines and interest charges. Even if you think HMRC won’t notice – many digital platforms now such as Vinted, Etsy and eBay report your earnings directly to HMRC. So, it’s better to be safe than sorry.

If you ever need help, contact an accountant, and have a browse through our guides and templates for some extra help. Happy side-hustling!

 
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