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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To resent paying so much tax on side hustle earnings?

311 replies

Powfred · 12/10/2023 22:41

I earn around 50k in my main job and pay all the relevant taxes through paye etc.

A few years ago I had a decent disposable income but with childcare, mortgage rises fuel etc it has gone down a lot. I do have a DP who shares these costs but they earn less and have also felt squeezed financially.

At the start of the year I began a side hustle as a hobby to generate some extra income. I figured if it did well I'd have some extra money for treats and days out etc. Not going to give details of side hustle in case outing.

Side hustle is gaining momentum and could potentially generate a few hundred a month soon. However, I've read that once you earn more than £1,000 per year from a hobby/ side hustle, you then have to declare and register earnings for tax. Given my main job salary, this would mean anything I earn from side hustle would be in a high tax bracket.

So (if I've understood correctly - happy to be corrected if not), if it does well then I'll have to pay 40% of what I earn from it in tax.

AIBU to resent this? I've tried to be entrepreneurial to generate more cash when main jobs aren't giving us as much disposable income as before but it just seems pointless if half of the income just goes to taxman.

OP posts:
Glarptip · 12/10/2023 22:42

No problem. You can resent paying tax if you like.

Original poster
Powfred · 12/10/2023 22:45

I don't resent taxes in main job. I've paid taxes all my life but if it's a side gig or hobby to earn some extra cash then why should that be taxed to the max as well? Side hustle already involves paying VAT

OP posts:
buckingmad · 12/10/2023 22:45

Correct. Or you can deduct your costs so you’re only paying income tax on the profits. Depends on your level of costs.

NeedingCoffee · 12/10/2023 22:48

Lots of options here OP; a half decent accountant will make sure you keep much more than 60%

DrJump · 12/10/2023 22:49

It's income. That's how tax works.

If you make more money you pay more tax.

Be upset about it but tax pays for stuff for schools, NHS, etc

Original poster
Powfred · 12/10/2023 22:49

buckingmad · 12/10/2023 22:45

Correct. Or you can deduct your costs so you’re only paying income tax on the profits. Depends on your level of costs.

I will have around £150 of yearly costs I could deduct. So if I made a profit of £2,000 - £150 = £1,850 - would tax man take 40% of 1850 or just the 850? Wasn't sure if that first £1000 was tax free

It just puts me off trying to build it more. Was supposed to be to help family out.

OP posts:
TomatoSandwiches · 12/10/2023 22:50

Have you looked into matched betting?
You don't pay any taxes on income from this.

Original poster
Powfred · 12/10/2023 22:51

NeedingCoffee · 12/10/2023 22:48

Lots of options here OP; a half decent accountant will make sure you keep much more than 60%

It so small at mo doesn't feel like it warrants an accountant yet but maybe I need some advice

OP posts:
androidnotapple · 12/10/2023 22:51

A side hustle that makes money is self employment so of course it's taxed. If you've used up your tax free allowance on your main job you don't get another.

venusandmars · 12/10/2023 22:53

It would be the same level of tax if you worked more hours as overtime in you main job.

Original poster
Powfred · 12/10/2023 22:54

DrJump · 12/10/2023 22:49

It's income. That's how tax works.

If you make more money you pay more tax.

Be upset about it but tax pays for stuff for schools, NHS, etc

No issue with main job income tax but surely small fry side hustles could be reviewed? I bet lots of people do similar to help get more money. We're in a cost of living crisis, system should be more flexible

OP posts:
Edinvillian · 12/10/2023 22:54

It's 40% of the 1850, not the 850. I didn't realise this the first year.

venusandmars · 12/10/2023 22:54

You earn above a certain threshold (however unfair that might seem) so any income over that is taxable at the higher rate.

What you would suggest otherwise? Everyone in multiple jobs being taxed a lower bands?

Twofortheroad · 12/10/2023 22:55

You could pay more into a pension pot to avoid the higher tax bracket.

might not help with providing money for days out etc but you’ll reap the benefit eventually.

Morph22010 · 12/10/2023 22:55

You can deduct £1000 instead of actual costs so if you make £2000 you can deduct £1000 and pay tax on the £1000 profit. When you get to a point where your actual costs are more than £1000 you can deduct actual costs instead

Original poster
Powfred · 12/10/2023 22:56

venusandmars · 12/10/2023 22:54

You earn above a certain threshold (however unfair that might seem) so any income over that is taxable at the higher rate.

What you would suggest otherwise? Everyone in multiple jobs being taxed a lower bands?

I think side hustles or small time second jobs should have a lower rate of tax. Anyone who takes a second job or does a side hustle probably needs the money

OP posts:
Greenberg2 · 12/10/2023 22:58

It’s highly unlikely you’ve paid taxes all your life unless you were a baby model.

If you have spent much of your working life paying basic rate tax then you are likely to have taken out more than you have put in, especially as you have children. I don’t really understand how you are paying VAT except for the cost of your supplies, in which case you can claim this against profits for income tax. So you will only pay tax on the money you make after taking off your expenses.

The tax system does not differentiate between money you earn for your main job and money you earn from your side hustle. It is all taxable income. If you’re paying higher rate tax you’re already doing well i life. Think about those who will never pay higher rate taxation and are struggling to put food on the table.

CrazyHamsterLady · 12/10/2023 22:59

You can legitimately write off a hell of a lot of expenses which could even make it look as though you’re running at a loss. There’s loads of videos on YouTube about it, or you could consider hiring an accountant. When we had our business, ours only charged £50 a month. Anyway, you can write off a portion of your rent or mortgage against your tax liability, if you use your car to deliver parcels you can claim
mileage. There’s loads of legitimate things. Don’t worry too much.

WarmBeerAndSandwiches · 12/10/2023 23:00

Income tax is paid on income, if it goes up it goes up and you pay more tax, whether it's from your side hustle, your main hustle or some other hustle. However, if it looks like your new business could be a good earner then you need to see an accountant as you may be better off trading as a limited company and extracting the profit as dividends. It does depend on your circumstances though.

*Disclaimer: this is an opinion not advice.

CagneyAndLazy · 12/10/2023 23:00

Powfred · 12/10/2023 22:56

I think side hustles or small time second jobs should have a lower rate of tax. Anyone who takes a second job or does a side hustle probably needs the money

Show quote history

Why though?

Why should they pay a lower rate of tax? What's the justification?

Mumof2teens79 · 12/10/2023 23:04

Powfred · 12/10/2023 22:45

I don't resent taxes in main job. I've paid taxes all my life but if it's a side gig or hobby to earn some extra cash then why should that be taxed to the max as well? Side hustle already involves paying VAT

Yeah no reason younshould tax on a job you enjoy doing when some of us are working overtime and either paying tax....or not getting paid, in jobs we hate

venusandmars · 12/10/2023 23:05

I think side hustles or small time second jobs should have a lower rate of tax. Anyone who takes a second job or does a side hustle probably needs the money

But then we'd all do that. I'd work a small job earning less than £12.7K (and pay no tax), then I get another small job on similar wage. And another, and another... and then a side hustle... But ALL our earnings count - together.

I understand that things are tough but our tax system is what it is. You have already used up your £12,750 tax free allowance in your main job, and your 20% tax allowance too. That does mean that your side hustle is being taxed highly.

You could refarame it, and see your side hustle (earning up to £1,000 per month) as your your tax free portion, but then you pay 20/40% tax on all of your main income. Same net result.

Soontobe60 · 12/10/2023 23:09

As your dp earns less than you, get him/her to do the side hustle! Tax problem solved.

WarmBeerAndSandwiches · 12/10/2023 23:11

CrazyHamsterLady · 12/10/2023 22:59

You can legitimately write off a hell of a lot of expenses which could even make it look as though you’re running at a loss. There’s loads of videos on YouTube about it, or you could consider hiring an accountant. When we had our business, ours only charged £50 a month. Anyway, you can write off a portion of your rent or mortgage against your tax liability, if you use your car to deliver parcels you can claim
mileage. There’s loads of legitimate things. Don’t worry too much.

OP always be very careful taking non-professional advice. There can be other tax implications when claiming a proportion of your mortgage interest (not your mortgage principal) as a business expense.

You often hear a lot of 'my mate Dave down the pub says I can claim this or that expense'. Dave down the pub's advice is nearly always wrong.

If you're serious about your business get a good accountant.

Unexpectedlysinglemum · 12/10/2023 23:13

Have you set it up as a limited company? If so you can probably pay out some as dividends tax free before you pay a salary to yourself . You can also claim back expenses. But that's life- anyone with multiple income streams has to fill in a tax return and pay 40% tax on anything even if they also happen to work full time.
I'd suggest cutting down to a .9 contract in your current job