Forget hot girl summer – it’s side hustle summer! How can that affect your tax bill?

As the days get warmer, people are more inclined to go out of the house and live their hot girl summer dreams – a time of living your best life.

Many people are struggling to afford to pursue this, so a side hustle summer may be used to bulk up the cash flow.

Side hustles can be anything from selling your chickens’ eggs to running a Vinted page.

Beware of the tax risks as you may need to report your extra income correctly to HMRC unless you want a fine.

What do side hustlers actually pay tax on?

All money that is made through a side hustle needs to be reported to HMRC if it is above £1,000, or else you could get a fine.

Some side hustles are more profitable than others, like online-run businesses, because they can have multiple revenue streams. HMRC can typically monitor these businesses more effectively, as there is often more of a paper trail.

Though businesses that are not online still need to report their taxes carefully and if you earn over the £1,000 limit, you may have to pay tax.

If you have another job alongside your side hustle, then you are more likely to face paying tax, as most income contributes to your tax-free Personal Allowance of £12,570.

How to file taxes as a side hustler?

For many people, tax is not something they really have to consider independently, as tax is usually looked after automatically for PAYE jobs.  When you start a side hustle, correct tax practice is all in your hands unless you seek professional tax advice.

The first thing you need to do 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.

It is a common misconception that side hustles are tax-free money because, if it wasn’t paid through an employer, people do not think about the possible tax implications it could have.

This misconception can lead to hefty fines and tax bills when HMRC finds out that you have another revenue stream and did not let them know.

You should get advice on the tax implications of side hustles today from our expert team. We can help you understand your obligations so that you do not risk compliance issues.

HMRC will find out if you have not disclosed the tax you owe, so be sure that you are accurate with your accounts to avoid facing penalties.

Contact us today to find out how we can support your side hustle tax and give you the hot girl summer you deserve.