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.

Tories have kept tax thresholds stagnant for a long time, which needs attention.

this gets overlooked

You can of course feel how you feel but its pretty ridiculous to resent paying tax just because its a side hustle when its still work and extra income. At least you're getting the 1k before tax whereas I'm self employed and as my side hustle is another string of self employment I pay tax on all profit regardless of any 1k cap. Same as on mat leave, I read that if you're employed you can so some self employment on the side but as I am self employed, I couldn't do anything beyond standard KIT days without it being seen as a return to work. Why shouldn't you pay tax on all that you earn whatever the source once you're over the threshold?

Just be glad you're not in the highest tax bracket then.

Also, is worth considering that the government is only generating 8% off the revenue collected by income tax from people in the standard and 40%. The rest comes from those in the 45% bracket, and even then from the ones earning considerably over £250k. It boggles my mind to think that 1% of earners in this country contribute 92% of the revenue generated in income tax. (Source ONS).

If you are serious about your second income stream, get an accountant. A decent one will save you more than they cost.

What's wrong with doing that?

People have had to work multiple jobs for generations before the benefits system became so broken and profligate that working minimal hours in order to claim optimum overly generous benefits became a lifestyle choice for many people.

Where did this ridiculous name 'side hustle' come from? - another 'americanism' I assume

It is either a hobby which earns minimal income or an income stream (self-employed).
You are not an 'entrepreneur'
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Of course you have to pay more tax on it if you are lucky enough to be a higher rate tax-payer!

It’s one or the other. So unless your expenses are more than £1k you are better off using the allowance.

Assuming you are fully into the higher rate band then yes if you did take off expenses then the full £1,850 would be taxed at 40%. Or if you used the allowance then £1,000 would be taxed at 40%.

Are you paying into a pension? Making gift aid payments? these both extend your basic rate band so you pay more tax at 20% rather than 40%.

Deoending on how much you expect this side hustle to take off the only real planning you can do is setting up a company. You’d then only pay corporation tax at 19% and then pay yourself dividends which are taxed at a lower rate than employment/self employment income.

i really sympathise OP. We’re actually selling our rental properties for essentially the same reason. It’s just not worth the risk once you pay 40% tax.

Correct it is income, exactly the same as if you earns more in your main job

So yes you are wrong to resent it

Aren’t you lucky that you can contribute so much to society, why not be proud?

Don’t set up a limited company as suggested above

Yes the dividend tax rate is lower than income tax but the company has to pay corporation tax too

Deduct any expenses and pay yourself an annual dividend (that attracts a lower rate of tax).

That's incredible, well done you.

Can you explain a bit more how you cover everything privately?

How do private emergency services work, is that a subscription service that sends private fire/police/ambulance services etc if you need them?

How do you get around if you don't use the road networks?

Do you subscribe to a private rubbish collection service?

Please do tell us more about how you manage to live without taking anything from the state.

Ah that famous entrepreneurial spirit of throwing in the towl and shouting "it's not fair" at the first roadblock

I have a side hustle of 7 rental properties on top of my “actual” job which I resent paying tax on. It’s not fair, property is a hobby for me and I was just being entrepreneurial when I went into it to make a few pennies for the family.

So I completely agree with you OP, no tax on anything except main job!

(obvs this is not true but it makes the point, income is income, not everyone makes their income from one job).

OP my cleaner's husband earns £26k a year and they have three kids one with special needs and they live in a 2 bedroom flat in the south east. She earns £5k from cleaning - you really aren't as poorly off as you think you are.
There are lots of people trying to make extra money at the moment.

The system wants your money through tax to pay for all the public services which are now more expensive due to the col!

I won’t disclose what I do as it’s outing but in addition to my full time job where I earn around 40K I do a creative career where for the last few years I’ve earned 6-12k per year. Last tax year I earned about 9K and was only taxed around £350. My accountants actually estimated I pay about £500 which I did, but HMRC refunded me a few weeks later for overpayment.

What I did resent was the massive accountants bill of £950 for not much work (I just had a few invoices to pass onto them so they weren’t drowning in my paperwork or anything ) .

I’ll be changing accountants for the next tax year as I know I can get that service done for a couple of hundred quid. It would be different if I was fully self employed but as I only need them for a job that isn’t my main income I don’t feel I can justify the 1K accountants bill any longer.

That said, a good accountant is necessary and important to (hopefully) make sure you don’t pay more or less than what you’re meant to.

I’ve heard this phrase a lot on here recently, how do you people know if they’re a “net contributor” or not? I assume I am as I earn over 40K, don’t receive housing benefit or UC, don’t have any dependents or use hospitals/doctors bar the occasional GP visit, but can’t be too sure. Not the point of the thread and it won’t make a huge difference to my life but just curious! 😆

I don't really follow your logic, OP. You don't seem to be the type of person who resents paying tax full stop - you show an acceptance of the need to contribute to public services. But you seem to be most annoyed about having to pay tax on income generated by something that you enjoy doing.

Surely, if anything, it's easier to work at something you enjoy, so that is all the more reason why it is fair to pay tax on any profits that it generates. If someone works hard cleaning toilets, is it more fair for them to pay tax than someone who makes money from a hobby? Surely, if anything, they need more of an incentive to work than the person doing something they love?

Also, I'm not sure why a second job/side hustle should attract less tax than someone working hard to earn a higher salary in a single job/business. Income is Income, regardless of where it comes from. You say that there is no incentive to take the initiative to increase your income if you have to pay tax on it, but I don't understand this as you still get the 60% of income that isn't taxed... isn't that your incentive because you're still better off than you would have been? I just can't follow your argument.

I have a similar income and side hustle to the OP and haven't been charged anything like 40%. In fact, last year I actually got a 2k rebate when I submitted my return as I'd been out of work earlier in the year and overpaid PAYE.

Just hoping HMRC haven't made a mistake now...

You are not wrong OP. Most people on here are economically illiterate and will give you a hard time without understanding that higher taxes actually prevent people for working or creating more. As you have already stated.

That's not right- ive just looked at the stats which vary immensely
"The share of income tax paid by the top 1% of taxpayers – a smaller slice of the population because so many people pay no income tax – has risen from 24% of the total in 2007-08 on the eve of the financial crisis to 30% currently"Th guardian quoting Institute of fiscal studies"

And thats just looking at Income tax- they pay even lower a portion of National insurance as that doesn't go up with income
.

Politicians would love you.
Their side hustles are usually lucrative positions on a board or writing articles for newspapers.
You’re working a second job, you pay tax appropriately.
Be pleased you don’t live in France where turnover is taxed too.

I took on a second job to my full time one to save up for a car: three nights working in a pub. I declared the second job and was taxed on both incomes. I didn’t expect not to be.
Income is income. You pay tax on it.

If you're that close to the higher tax threshold, just keep increasing your workplace pension contributions in line with your current or expected side hustle profit. Badda bing, it's effectively the same as your side hustle money is going into your pension fund with 40% tax relief.

I need the money. I don't have the skills or resources to start a "side hustle" so I got a second job in a pub working evenings alongside my full time day job. Should I not get taxed as much on my pub job because I need the money? Or should I be paying tax because I have failed to acquire the clever skills to run my own side business? Is it only clever creative "I run my own business" people that should be exempt from tax on a second job?