To resent paying so much tax on side hustle earnings?

[Powfred]

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.

This. The fact you developed it from a hobby based activity means you probably enjoy it but that doesn't really matter because it's still an extra job and treated the same.

I have a few creative skills I could possibly monetise but I don't for exactly this reason, it can take the fun out of it.

Good on you for taking it this far though.

Others are right though, it's not PAYE so, if you grow your business, you also need to grow your awareness of tax (with an accountant if it gets that far) to make sure you're not overpaying.

Put the money into your pension, you'll get tax breaks that way.

Do you like having an NHS op?

Yes I think it is the fact its a fun hobby rather than 'work' that makes me resent the tax bit perhaps. It's like taxing my fun/ leisure time as I enjoy doing it.

I also feel like there should be some sort of fiscal reward when you're taking initiative and trying to generate a bit of extra income in this way but I suppose it would be impossible to design such a system and it would be abused.

I just wouldn't declare it unless absolutely unavoidable. And then limited company it and claim every expense possible.

The government can keep it's fat greedy fingers out of my pockets thanks.

If it helps think of your side hussle as the tax free part of your income then you are o nly paying tax in your main job...

@Powfred

It's like taxing my fun/ leisure time as I enjoy doing it.

So do whatever it is without making a profit? If you're selling something, sell it cheaper so you don't make a profit.

I don't make a profit from my hobbies. If I did, I'd be taxed on them, as you are.

Why is this different from being taxed on overtime 🤔

Yes but the NHS is badly run and just has endless pots of money thrown at it by inept governments so I resent paying extra tax when it's not used efficiently. I've had to fork out for private appointments several times as the NHS wouldn't help me after two miscarriages - private gynaecologist found a small issue and sorted it. It was a lot of money for me to go private but I had no choice

Well, obviously you will register for VAT as soon as your hobby generates a steady income. Then you won't pay it on your supplies, or will claim it back.

And when it generates a steady income ... you pay income tax.

A business is still a business if you've got another job as well!

I just wouldn't declare it unless absolutely unavoidable.

Hopefully you don't expect to benefit from any taxpayer funded services, either.

OK so do it for fun and not for profit, charge costs only

But sorry, why is your fun initiative to generate income somehow more worthy of reward and tax breaks than;
Someone working overtime
Someone with a weekend cleaning job
Someone who lives on the same salary as your main income but gives up time for free to volunteer at a charity?

But then everyone would be incentivised to split their job into ten little businesses to avoid tax, which would be unproductive.

It is income tax - tax you pay on your overall income.

You’re right.

£1,000 isn’t high enough to get tax free.

Perhaps this should be reviewed and raised to what? £3,000? £5,000?

£1000 doesn’t go anywhere near as far as it used to.

You do get an initiative....you get to earn 1k tax free on your side hustle before they charge you tax. May not be much of one but nonetheless you pay less tax on your side hustle than if you earned 1k extra in your main job.

PP has basically summed up why your logic is flawed. If side hustles weren't taxed at the same rate, we'd all be working part time and earning 12.5k in our main jobs and having 40k side hustles.

I think overtime, weekend jobs, any kind of side gig should be treated differently in tax system to help people out. If I was a politician I'd try and come up with good policy on this.

I understand the frustration at the underfunding of the NHS, but depriving it of revenue isn't going to fix it - voting and canvassing for a party to run it more efficiently /fund it properly would

Yes exactly.

People can earn up to around £5k tax free when renting a room out in their home I think. Why can't hobbies have same threshold?

OK OP. I'll take on a 16 hour work contract and then do 20 hours a week overtime 😁....you really haven't thought this through.

But basically if you are a higher rate taxpayer, you’re only ever going to get 60% of what you earn, whether that’s pay rises, promotions, overtime or side hustles.

You have to think very carefully about whether the extra work is actually worth it!!

It's INCOME Tax OP. A tax on INCOME.

Your "reward" is that you get to keep at least 60% of the income from your hobby/"side hustle"/business

What makes you any more special than someone who has a full time job, but has to take an evening job to make ends meet and pays up to 40% tax on their part time job?

Yes, YABU.

I will vote Labour even though they'll probably make me pay more tax as they think people like me are rolling in it in the higher tax bracket.

Can you please keep your fat greedy fingers out of my bin collections and off my roads plz

Well you are more rolling in it than people in the lower tax brackets