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.

Totally get where you’re coming from. You’re already busting your arse arse doing a full time day job which you part pay at the higher tax rate.
I think worth looking at an accountant who could probably write off alot if that tax

The £1,000 disregard relates to TURNOVER and not to profit OP.

If your sales total over £1,000 per year then you must declare it all on your tax return.

Could you work cash in hand?

I feel your annoyance but there has to be a limit somewhere and for right or wrong it's £1000.

As others have said you can claim tax deductions for all sorts of things - the HMRC website itself is very helpful on this. I've had a couple of poor years and have manage to legitimately reduce my tax bill substantially. I'm a sole trader so haven't had to bother with company registration. You don't need to register for VAT until you earn in excess of £85k.

Another suggestion of tax evasion.

I paint - cards and pictures. I have been asked several times recently if I would sell things. A friend offered to buy a set of 6 cards for £3 each. I just gave her them (there were lots in a box I'd put them in). Then her SIL asked if I would do her a set and she'd pay me £4 a card. I said I wasn't interested but it got me thinking.

I wouldn't be earning anything at all from it. It would take about 3 hours to paint each set - then there's the cost of paints, cards, envelopes, then time. But I paint them anyway- just like doing it and I send them on birthdays etc. A couple of friends have asked about buying paintings. I've just said I don't sell them or do commissions- but perhaps I could: I have a 'studio' full of them. It has got me wondering.

So have I understood this correctly, if (after materials), I earn less than £1000 a year, I don't have to pay tax on it?

why do you think you’re special & don’t need to pay tax when you earn way over national average? Cost of living has hit everyone doesn’t mean they commit fraud!

I agree with you. At a few times in my life I've had to get another job on top of full time job. 90% of those times I wasn't a higher tax payer, but was taxed heavily on second job.

In Covid times, my fixed term contract ended. I managed to get a job in my field, but for a lot less than my previous salary. So I took on a second job again, the amount of tax was insane.

I'm obviously not against paying taxes and NI, but think a earnings from second job / side hustle should be combined with earnings from main job and there be a earnings cut off before addition tax, rather than 2nd job taxed higher no matter your usual earnings.

I think some side hustles may take a fair bit of time. Someone may not mind spending quite a lot of extra time than they would have done on a hobby to make it 'sellable', happy to make a small amount per hour. When this is then taxed, their hourly rate may be absolutely pitiful.

think a earnings from second job / side hustle should be combined with earnings from main job and there be a earnings cut off before addition tax, rather than 2nd job taxed higher no matter your usual earnings.

What do you mean by this? A second job isn’t taxed higher - I think you’ve misunderstood. The system works exactly how you want it to - all your earnings are added up, your regular £12K tax free allowance dedicated, then you’re taxed on what you earn over £12K. It’s just that on the second job payslip (if you’re PAYE) the first job has already claimed your £12K tax free allowance so it appears like a higher rate of tax - but it’s not. You’re taxed on overall income.

You either agree that people earning more should be taxed more (called progressive taxation) or you don't- it doesn't matter where you get the income from. I strongly support progressive taxation- it is the fairest way of funding the things that we need as a society. I honestly don't see why you think the money you earn on the side should be different - if i get rental income should that not be taxed?
And i loath the term side hustle.

Wait until you're paying tax on your pension - then you'll really resent it.

depends on the hobby where i live; food related hobbies are tax exempt. then there is capital allowances on supplies needed to run and keep the business going, again where i live these can be deferred for up to 7 years (often the first year you need quite a few supplies but have low returns).
you don't necessarily need to hire an accountant, in our case dh had a 1-1 phone call with an accountant from hmrc to review the process.
in our case we registered the company file taxes and get a nice return twice a year.
Claim capital allowances: Overview - GOV.UK (www.gov.uk)
dh uses quicken business, which tracks all his milage and allows him to take photo's of all receipts for filing taxes.

Why shouldn't your income be taxed? Why does it matter how many hours you work to get it? Or what you do?

If the government offer lower rates for "side hustles" you end up where higher earners structure their income to take advantage of it. Fair?

How is your "side hustle" more worthy of a lower rate of tax, than a nurse working an extra night shift each month to pay for christmas?

Reality is, you thought your side hustle was more lucrative relative to the time spent than it really is. Its disappointing. But thats life, you don't get to contribute less tax by working 5 part time jobs rather than 1 full, or by being self employed.

Ps your side hustle involves charging vat,not paying it. And you shouldn't need to charge it unless bringing in quite a lot of income.

Side hustle sounds like you're playing three-card monte on a street corner with your OH keeping an eye out for the rozzers.
Of course, that would be tax-free.

You don't pay tax on the first 1,000

You can deduct the cost of materials, packaging etc from profit before paying tax too Any tech equipment or paper etc you genuinely need too.

Also .. now you know the tax you'll pay, look again at the prices you charge to make the desired amount

Your proposal is how it is supposed to be. Op is being charged higher taxes because she's a higher earner. Not because it's a second job. Most pay the lower tax on hobby earnings

I think this is correct. If profit minus cost of materials is less than 1000 you don't pay tax. But other posters have made me unsure' I will check

Seriously? No roads, street lights, infrastructure. Do any employee use public services? Do your bins get emptied?

@LuluBlakey1 do double check but materials can include laundry soap/household cleaners for clean up following the work paper towels comes to mind, some aspects of your lighting and heating plus some reasonable furnishing (new table lamp for lighting, ergonomic chair etc. all within reason). any storage supplies for your products so totes and bins and tarps comes to mind and possibly even some car fuel on both purchasing supplies and delivery.

Spend all of the side hustle money on business related expenses and don't show a profit. Presumably your household lent the side hustle the seed money so that loan needs to be considered.

I would resent paying taxes on a side hustle too, I resent paying any kind of tax, despite accepting the necessity. But I especially resent the fact that individuals trying to get a bit extra and who have little access to complex financial advice/scams end up paying full whack when massive corporates get away paying hardly anything (Starbucks? etc.)

This. See an accountant. X