During the three lockdowns of the last few years, a lot of us on furlough picked up a new hobby and provided our work contracts didn’t forbid it, we realised we could turn it into a side-hustle.
During lockdown a side-hustle, a side-hustle could be essential, especially if your employer decided not to top-up furlough payments beyond the 80% of your salary.
Of all side-hustle owners, 58% started their project after March 2020 and include everything from selling on eBay to freelance copywriting.
But let’s face it, your extra work isn’t just a side-hustle anymore. It’s a business and you should be treating it like one.
Of course, side-hustles have never been exclusive to lockdowns, so if you’re thinking about using your downtime from work to keep earning, this blog is relevant to you, too.
We’ll start with the basics. If your side business makes more than £1,000 a year, you have to register for a self-assessment tax return. There’s no getting out of it.
This is the process that every self-employed individual, whether they are a sole trader with a dozen employees, or a side-hustler, must go through to pay income tax.
You must register for self-assessment even if you know you have no tax to pay, perhaps because your income is within your personal allowance (£12,570 in 2021/22). You also have to register if HMRC sends you a letter telling you to do so.
You must register for self-assessment for a tax year by the 5 October directly after the tax year. So, if you need to do it for this tax year (2021/22), you need to register by 5 October 2022.
You’ll then have by 31 October 2022 to file your tax return if you choose to do a paper return.
If you’re doing it electronically, you would have to get that done by 31 January 2023, which is the same deadline to pay your tax.
Treat it as a business, not a hobby
If you’re serious about treating your side-hustle as a business, there are some changes you should make, especially if you want it to become more profitable.
First, while a side-hustle takes advantage of opportunities as they arise, a business invests to create opportunities, which you should be doing.
So, think about what you need to do on your side to do your job better. Could a new computer programme or piece of software allow you to work more efficiently so you can serve more clients in less time?
Or perhaps it’s time you move on from social media marketplaces and invest in a website and marketing campaigns to draw in a new batch of buyers?
Businesses are also careful with their money. Sole traders in particular will always keep their business’s money and their personal income separate in different bank accounts.
You should do the same. That way, you’ll see exactly how well your business is doing and whether you are profitable, which is especially important if you buy and resell in your side-hustle.
Plan your business
Crucial for any business, you need to create a plan and properly budget your activities.
Even just creating a schedule and plan of how much revenue you can expect in a certain period of time could go a long way.
Not only can this give you the motivation to keep going on your venture, but could also help you expand your business.
A plan will also reduce stress – if a side-hustle is going to be anything, it absolutely should not be stressful.
Talk to us about how we can help make your side business profitable.