Tax Changes 2024: Need to Know Info for Side Hustlers
Starting an online side hustle is an amazing way to earn some extra income while doing what you love. It’s a chance to turn a passion into a profitable venture right from the comfort of your bedroom. What better way to make a little income on the side? But then, there’s tax. There — we said it. Like shouting “boo!” in a library, the mere mention of the word is enough to send shivers down the spine, conjuring images of paperwork mountains and costly mistakes. Alas, paying tax is a fact of life. The good news is that keeping your accounts in order isn’t as tricky as it sounds. It’s all fairly simple, really. In today’s blog we’ll explore some new tax rules outlined for 2024, from shifts in tax brackets to changes in deductions and credits, giving an overview of how these updates might impact you. You may even be able to save a little money along the way. Embarking on an online venture can be rewarding in more ways than one. According to research by Aviva, as many as one-in-five UK adults have started online side hustles since March 2020. The average post-pandemic side income sits at about £497 a month, with around 16% of these new projects now earning over £1,000 each month. 39% of respondents in the same Aviva study describe turning a genuine hobby and passion into an income stream. 30% state that the additional income was to help cover their own bills and expenses. 21% of new side hustlers, meanwhile, are aiming for more than just a top up, with the ultimate goal of quitting the desk job and becoming their own boss. ❝ Keep in mind that your side hustle, no matter how small, may still be a business in the eyes of tax authorities. This means that any income you generate may be subject to tax. ❞ Some side hustlers assume that if their side gig isn’t their main job — or if they haven’t been trading for a full year yet — that they don’t need to worry about taxes. Sadly, that’s not the case. Keep in mind that your side hustle, no matter how small, may still be a business in the eyes of tax authorities. This means that any income you generate may be subject to tax. Tax laws are changing all the time and it can be difficult to keep up. As we’ll get into, some of the tax information for last year is about to go out of date (if it isn’t already). Understanding how to handle your taxes and self-assessment is key to avoiding stress and penalties. In this guide, we’ll offer some tips on where to look for updates and how to understand what they mean for you. We’ll break down what counts as taxable income for your side hustle and how to figure out what you owe. Keeping informed is also key to staying sure you’re taking advantage of all the opportunities to save. Be sure to check the gov.uk website for official guidelines. Remember that you should always seek tax advice from a qualified professional. The £1,000 Threshold To start on a positive note: You probably don’t need to make a declaration if you’ve made less than £1,000. This one isn’t a new rule for this year. Tax-free allowances for property and trading income came into effect back in April 2017. If your annual gross trading income is under £1,000, it may be the case that you don’t need to tell HMRC. However, be sure to double check the government’s official website, as there are some situations in which you’d still need to register for a Self Assessment and declare your income on a tax return. Even if you make less than £1,000, you should always keep a record of your income. Good record keeping will make it easier to comply with tax rules. There’s also a variety of deductions and credits you can take advantage of — more on that later. But what if you are making more than a grand a year through your online gig? First of all, congratulations! It’s great to see that hard work is paying off. If you run a part-time business online and your gross annual taxable income is more than £1,000, then you’ll need to inform HMRC. You must register for Self Assessment by 5 October in the following tax year. This is true whether you work for yourself, own your own small business, or have money coming in from a number of avenues. Given that £1,000 in a year only equates to around £80 per month, there’s a good chance that you’ll be above this threshold. Tax rates for 2024 The tax year runs from April 6 to April 5, the following year. Everyone gets a tax-free Personal Allowance of £12,570, which decreases after £100,000 income. Employees working for a company would usually pay taxes on income (via PAYE), but this isn’t the case of an online side hustle. Estimating your taxes means figuring out roughly how much you need to pay. You’ll look at what you’ve earned, what you can deduct, and then use that info to work out what you owe. If you’re doing this throughout the year, you can avoid nasty surprises when the bill comes due. Here’s how it breaks down based on earnings: ☐ Up to £12,571: 0% – Personal Allowance ☐ £12,571 to £50,270: 20% – Basic Rate ☐ £50,271 to £125,140: 40% – Higher Rate ☐ Over £125,140: 45% – Additional Rate Remember: Income tax bands are based on earnings across all sources of income. So while your online gig might only be bringing in £10k a year, if you’re on a £25k salary in your main job, that’s £35k in total — and you’d be liable to pay tax on the remainder after your Personal Allowance. (This is a simplification, though, as we’re not taking into account National Insurance contributions and other factors.) Register as a sole
One, Two, Three plan – the importance of your business plan
Your business plan is probably the most important document you will ever create during the life of your business and yet you are expected to create it before you have even got things under way. That often makes it appear more scary than it really is, so here’s 6 top tips from us on how to approach creating your business plan: Don’t be scared You are only sharing what you already know and believe. A business plan is simply a sort of resume for your proposed business. It has very similar uses to a personal CV too. You should use it as your calling card whenever you have important meetings, say with your would-be business landlord, bank manager or potential investors. In those sorts of situations explaining what it is you want to do and where you want to head with it might not come across clearly in conversation and then your written business plan comes to the fore, outlining who you are and what your purpose is. Include your dream as much as reality Don’t make stuff up or set unrealistic targets but certainly make sure your business plan is created to explain and illustrate the vision you have for your business. Your dreams and aspirations and the passion you have for them will go a long way towards convincing others into helping you achieve that vision. Do achieve this you will also need to show how you realistically intend to achieve your targets, what expertise you have and where you will obtain help from other experts to ensure your venture is successful and will turn a profit. It is a document for you, that you can share Too many people think that a business plan is somehow separate from their day to day business. In fact, it is quite the reverse. What you do day to day and where you want to head from that is what your business plan needs to be about. While it is important to create a document that presents your business concept so that others quickly grasp what you hope to` be doing, your business plan should first and foremost be developed for your own use. Use it to guide decisions, inspire you in moments of despair and refocus you when you are faced with juggling several things at once. Be honest with the figures A business plan needs to be truthful and have attainable targets. Consider precisely the expenses you will incur for each aspect of your business. Projected sales and monthly expenses should be based on at least some sort of market research (and include reference to that too). Set your targets of the volume of business you will need to generate in order to meet your obligations and work from there. How realistic would it be to generate more business on top of that? Include reference to people Even those who are not yet signed up to work for you. Include descriptions of the sort of people you intend working for you, what their expertise, experience and strengths will be. Include the same for yourself. As a start-up business the people within your organisation are probably the most important asset – especially if the salaries you can offer are fairly restricted. Getting staff who will go the extra mile because they buy into your company idea will make you far more productive in the long run. Keep updating your business plan as you evolve Your initial concept presentation plan is vital to get your business going, but always ensure you review your plan at regular intervals and keep an updated copy too. Make sure you revisit it and update any projections with some actual figures and revised projections. Include periodic reviews of how things have gone and what you have learnt and how you are implementing it. You never know when you may need to seek new investment so having an up to date business plan ready will save you a lot of stress over time. It will also help you stay focused on where you want your business to head. Maybe it is all common-sense, maybe you need a little more guidance. There are countless Business Plan templates available on the internet but importantly remember your business plan needs to be unique to you. A template should be used as guidance not as a definite way of doing things.