If you’re thinking of starting a side hustle, here’s the essentials you need to know before kicking it off.
What is a side hustle?
A side hustle or side job is a way of earning money on the side of a main job. This could be anything from a second or even third salaried or pay per hour job, to working via an app in the gig economy, to freelance work ‘on the side,’ to participating in projects that bring in some extra income.
Buying and selling items online, trading cryptocurrencies or joining focus groups to raise extra cash have all boomed in popularity since the start of the pandemic.
Unsurprisingly, roles that can be performed from home have become increasingly popular, as side hustlers swap cleaning and painting/decorating for social media influencing and virtual private tutoring to raise funds.
Self-employed or worker? Know what you’re entitled to
Some people have joined the gig economy as Uber/ private hire drivers, food delivery drivers or cleaners to make some extra money before or after their main job.
Gig economy workers have traditionally been classified as self-employed for employment law purposes, meaning they are ‘their own boss’ and do not receive benefits such as holiday or sick pay.
But in February 2021 the Supreme Court ruled that Uber drivers are workers and not self-employed, ending a four-year dispute which could have wide-ranging implications for the rights of people across the gig economy.
They are now entitled to holiday pay, a guaranteed minimum wage and other basic workers’ rights. They must also be paid for the time they spend on the app.
“As a worker, you have certain legal protections and benefits, such as the right to paid holiday and the right to receive the National Minimum Wage,” wrote The United Private Hire Drivers (UPHD) branch of the Independent Workers Union (IWGB) on Twitter.
Deliveroo drivers, on the other hand, are classed as self-employed, meaning they are not afforded the same rights.
So if you’re thinking of setting up a side hustle as a driver via an app, make sure you get what you’re entitled to.
New research suggests that more than a quarter of those with a second source of income are accidentally dodging tax, according to Online Money Adviser. This means that if you’re making extra money but failing to declare it to HMRC for tax purposes, you could be committing fraud.
Under the government’s Trading Allowance, you can earn up to £1,000 from your side hustle without needing to register with HMRC to declare it. You can simply pocket the cash.
However if you earn above £1,000, you need to let HMRC know you are earning money as a self-employed person within three months or you could face a £100 fine.
There are different ways of structuring your own business. You could be a sole trader, a limited company or a partnership. There’s information on the pros and cons of each option at gov.uk.
If your side hustle comes from another form of employment, such as working in a restaurant, HM revenue and customs will be informed and you should receive a payslip like any other employment. You will get a different tax code on your second job.
The tax code on your main job, assuming it pays you more than the Personal Allowance, should be 1257L for the 2022/23 tax year, according to MoneyHelper. Depending on the rate it is taxed, your second job should have a BR, D0 or D1 tax code.
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