People are doing many side jobs these days. Some sources say that more than a third of people in the UK already have a side job, and that number could soon reach half. A side hustle is a way to make extra money on top of your main job, whether you work for someone else or for yourself. HMRC is aware of the giant rise in the number of people working extra jobs. The UK tax authority warned last year that it had told popular platforms to show side-hustle income so that it could go after people who owed tax and report the self assessment tax return for side hustles to HMRC.
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Rule for Self Assessment Tax Return for Side Hustles
From January 1, 2024, there are new rules for the self assessment tax return for side hustles, but people who sell used things on resale websites will not have to pay any more taxes. The new rules don’t change how much or when you must pay tax on your side job income.
Digital platforms will have to collect and send HMRC information about seller deals and business income. One year after the rule change, these platforms have to tell how much money sellers made.
A “digital platform” is a website or app that lets sellers meet with people who want to buy their goods and services. The HMRC may be able to see your transactions and the value of the things you sell on these sites if you offer car services, food delivery, or short-term rentals. This written document will help you determine if you owe taxes on your sales.
The UK joined the Organisation for Economic Cooperation and Development’s (OECD) global deal, which lets tax authorities share information with those in other countries. This arrangement is what led to the changes.
Difference Between a Job and Side Hustle
A side job or side hustle is something you do in addition to your main job to make extra money.
For example:
- As a dental nurse, you have a full-time job. You make clothes to sell on Etsy when you’re not working.
- Your full-time job is as a PR manager. You work as a freelance writer for the drug business when you’re not working.
- You’re an electrician by day. You have a pet-sitting business after work.
HMRC says that the amount of money you make is what makes a job different from a side job. If you make less than £1000 in a tax year, that money is not taxed. That means you won’t have to sign up as self-employed for self assessment tax return for side hustles or tell HMRC about this income.
How To Complete Your Self-Assessment Tax Return for Side Hustles
To file a self-assessment tax return for side hustles, you must include side income, claim tax relief, and send the return by the due date every year. Self-employed people can earn up to £1,000 a year from trading, casual, or other sources without having to pay tax or National Insurance. This level of exemption is called the trade allowance. If your income exceeds this, calculate your income tax.
We need to know exactly how much tax you have to pay on the money you make from your side job. Think about income tax and national insurance. Talk to HMRC or use a tool for calculating pay from your side hustle to find out exactly how much tax you owe based on your income. If you keep track of the money from your side job and file your self-assessment tax return on time, you can avoid fines for paying your taxes late or wrong.
Record Kept in Self Assessment Tax Return for Side Hustles
As a sole trader, you need to keep accurate, up-to-date records of your sales and business costs and expenses, with exact numbers and dates shown. This way, you can be sure that you fill out your yearly self assessment tax return correctly. It shows proof of the numbers you used, and it pays the right amount of tax. You also need to include extra tax return pages SA103 to report self assessment tax return for side hustles income and any tax deductions or allowances you want to claim. Depending on the other ways you make taxable income, you may need to fill out more forms.
What Happens if you Miss Filing a Self Assessment Tax Return for Side Hustles?
You have until midnight on January 31 to file your self-assessment tax return online. If you don’t, you will be fined £100 right away. If your records are not correct, full, and easy to read, HMRC can fine you. HMRC may also require you to provide evidence of the purchases you make and the tax breaks you claim. A big HMRC fine can happen if you claim fake costs or if you knowingly underreport sales to pay less tax. Intentionally not paying taxes can result in a fine and the obligation to pay all back taxes and interest.
How to Register your Side Hustle with HMRC?
Registering your side hustle with HMRC helps you stay legal and maximise your hard work because you deserve it. The two main steps in the process are choosing a business type, like a sole trader or a limited company, and signing up for self-assessment.
Setting up a formal structure for your side business is one of the best ways to get it off the ground. By setting yourself up as a sole owner or limited business, you can make the process easier and run your side business more efficiently. To stay in line with the rules and avoid fines and extra interest on late payments, make sure you register with HMRC as a self-employed person before 5th October of every year.
Can you Claim Back Tax on Side Hustles?
Assuming that your side job is classified as “trading” and that you need to pay more tax because of it, you may still be able to claim some expenses back to lower your total tax bill. All of these costs are called “allowable expenses.””
Self-employed costs must have been directly related to running your business or side job to be considered allowable. Such expenses could include things like the costs of running your business, the trips you take for work, or even the cost of your business insurance.
The HMRC allows you to deduct these costs from your business’s profit and pay tax on the remainder. So, knowing exactly what costs are tax-deductible will help you make sure you pay the right amount when you file your self assessment tax return for side hustles at the end of the year.
Conclusion
Finally, it’s important to know about the self assessment tax return for side hustles in the UK if you want to make the most money and meet your tax responsibilities. This complete guide has given you all the information and tools you need to be successful with your side job, from registering it with HMRC and claiming allowable costs to balancing work and self-employment. If you follow the right steps and know your tax obligations, you can maximise your side job’s money-making potential.
Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.