The Salary Calculator

The rise of the side hustle 

by Madaline Dunn

There has been an exponential increase in the number of people pursuing a side hustle in the UK in recent years. Freelancing sites like PeoplePerHour, for example, have seen astronomical growth in the number of people signing up. Similarly, the number of people using Vinted and other selling platforms has also skyrocketed. Whether it’s to earn a bit of extra cash when money is tight or to pursue passion projects on the side, there are so many reasons why people are getting into the entrepreneurial spirit.

Interestingly, while you might think that working an extra job on the side of your main gig might make you feel worn out, studies have shown that having something on the side can actually lead to employees feeling more fulfiled.

That said, it’s important to note that while a side hustle can help top up your monthly wages and build your business, there are some important details to bear in mind. At The Salary Calculator, we’ll walk you through the following:

• Why more and more people are pursuing a side hustle
• The tax implications of adopting a side hustle
• How to protect yourself, business and employment when side hustling

More people join the side hustle revolution

Some call it the ‘Golden Age of Entrepreneurialism”; others the “Rise of the Side Hustle,” but one thing is for sure, more and more people are taking on extra work alongside their primary job. Whether a second job or a side project, a recent Barclaycard survey, found one in 12 people in the U.K. now has a side hustle, the equivalent of 6.49 million people.

A number of factors are fueling the surge, including the development of various technological tools and platforms, increased flexible working arrangements, and the rising cost of living. According to Aviva, some of the most popular forms of side hustling include selling handmade products, art and photography, and freelancing. Many are also increasingly using social media as a platform through which they can earn money.

The tax implications

If you’re taking on work alongside your main employment, you will need to declare your earnings with HMRC, and you’re also responsible for paying tax on any earnings you make. The only exception to this is if you earn less than £1,000, which is the threshold allowance of additional income outside of regular employment.

So, how do you go about this? Well, first, you’ll need to register your side hustle with HMRC and file a Self Assessment tax return. This needs to be done every year by 31st January, which is also the deadline for paying anything you owe. To make sure you have everything in order to report your earnings, be sure to keep copies of your invoices, bank statements and receipts.

While for the time being, those working a side hustle only have to submit an annual Self Assessment tax return, and payment on account on July 31st, HMRC is introducing Making Tax Digital for Income Tax. Through this new initiative, those earning money through a side hustle will have to submit quarterly returns, and a single final declaration for all income on January 31st. While this was due to be introduced in April 2024, this is now being pushed back and is launching in two phases:

• April 2026 for those earning over £50,000, and
• April 2027 for those earning over £30,000.

It’s always good to make sure you’re keeping track of your finances and putting money aside each month to pay your tax bill, so you’re not left with a big bill at the end of the year and unsure of how to tackle it. To figure out the exact tax implications of your side hustle alongside your full-time employment, head over here.

When you register with HMRC, you’ll also have to decide how you’re registering, whether that’s as:

• A sole trader
• A partnership, or
• As a limited company

If this all sounds like a headache, it could be work speaking to a tax advisor to get expert insights on the tax implications. Likewise, there are accounting platforms that can help make dealing with taxes a bit easier. Xero, Sage and QuickBooks are some of the most popular.

Safeguard your side hustle

When it comes to earning extra income on the side of your main job, often safeguarding your business can be a bit of a second thought. However, it’s key to make sure that you’re protected and doing everything above board, because side hustling can be potentially risky without taking the above into consideration.

First of all, check your employment contract, as some companies require you to disclose business activity outside of your day job. More often than not, if your business operates outside of your working hours, is not distracting you from your full-time job and you’re not operating in competition with your employer’s business, your employer will give your side hustle the green light.

In addition to this, it’s essential you find out the obligations for your industry, as you might require a licence and it’s also worth looking into whether your business could benefit from insurance. Some options include:

• Public liability insurance, which applies when someone gets injured or incurs a financial loss, and holds your business responsible,
• Professional indemnity insurance, which protects you if a client loses money as a result of bad advice, services, or designs,
• Employers’ liability insurance, which only really applies if you choose to develop your business and take on staff to assist you with your work and is a legal requirement.

Tags: Economy, Jobs, self employment, side hustle, two jobs