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.

To do that she would have to set up a limited company. That comes with a while load of hassle and legal obligations

Alternatively we could have a fair living wage for all and not screw up our economy. Something has made it all much worse over the last 13 years 🤔

Yes I knew I'd get flack as I'm in 40 % bracket so people assume you have lots of money and how dare you complain about tax. Maybe if we had better government and public services I'd feel better about the whole thing

Do you do your side hustle from home? You can claim some of your rent/mortgage/phone bills, etc

Yes I think I'll just have to stop building it up and keep it very small. Nothing like a bit of heavy taxing to clip your business/ creative wings!

It doesn’t matter whether it is a “side hustle” or whether you (general you) simply get a higher paying job, when earning go over a certain level, you pay 40% tax.

And if you are registered for VAT then it is surprising you are not already over £1000 per year profit. You must be going something with very high turnover and costs? Also your business is not paying VAT, if you are registered for VAT, your customers are paying it and you are merely collecting it and handing it over.

there are many multi million organisations that pay no tax .. I would rather they were targeted..

however there are many people doing food deliveries, extra jobs just to put food on the table ..

its too simplistic … I worked an extra 30 minutes last week but I only work 32 a week .. where do the hours become overtime?

Exactly!

It sounds like you are outside of the UK?

If you live in a country without public services at all, then that's a different set up. Not one that I would ever choose, as I've seen how disastrous that can be for the people at the bottom of the pile, but I'm glad it works for you.

In all honesty if the side job was cash in hand and it’s not your main source of income then I wouldn’t declare it. If you work full time and pay tax via PAYE as you say then that’s your contribution.

If a certain people would pay their taxes, instead of putting them in offshore accounts, just think of the difference that would make!!

But why should a side hustle pay less tax? What’s your reasoning apart from you want to pay less tax?

I can understand why anyone might 'resent' having to pay tax, but I don't understand why anyone with a basic income of £50K would expect to be able to earn more without that also been treated in the same way as any other taxable income at that amount.

Take some proper advice from an accountant.

Consider if its worth paying more into a pension on your main job so you only have to pay 20% tax.

OP every successful multi billion business probably started as a “side hustle”. Are you saying they shouldn’t pay tax?

If you pay yourself dividends the tax rate is 20pc as far as I understand iypt, or reinvest in the business so there's no profit to tax. I don't pay myself a salary it all goes back in the business to pay next month's expenses. Ltd company cost about 30.00 to set up and an afternoon of time including business bank account and registered office.

Once your turnover (not profit) reaches 1k you have to fill in a tax return and oh tax on any profit.

First 1k of dividends is tax free. Rest, taxed as per income levels just no NI is paid.

YANBU OP and it p*sees me off that people with a bit of ‘drive’ are penalised so damn much.

I wish more people understood this and stopped thinking that limited companies allowed you to ‘avoid tax’ and withdraw dividends as you please…

Yes why can't they raise tax free amount to 5k like with renting a room in house? Then pay 40% after first 5k, seems a bit fairer

I know, I have a limited company. But she doesn’t earn that much from it, so it’s largely negligible. She could also gives her partner/husband shares to take out the same dividends.

If you see an accountant, won't that wipe into your profits - so would the cost of an accountant be worth it ?
Even if the professional charge is taken from your gross profit

A profit of £1850 - well, it's earnings above the threshold so that's taxed.

As has been explained.

OP will be outraged to hear that once you’re over £50k of taxable income then child benefit gets recouped too. By £60k you get nothing. So for one kid CB is say £1,250, earn an extra £10k and you not only get 40% income tax but also lose another 12.5% by paying back CB. More if you have more than one DC.

This can be minimised (mainly by making pension contributions) but the 50-60k bracket is a really tax-expensive place to be. Get out the other side or wait for the higher rate bracket to be raised… if ever.

Apologies, I've not read ever post. I started a 'job' - my Mum not last week told me me it's a hobby - round looking after our children..... I now earn / get more money monthly than my husband who has had a professional job all his life.

The way I see it is I'm now in a privileged and happy position to be earning and now paying far more tax for something my Mum still thinks is a hobby / bit of fun - though I would argue is now a job as it takes up far more time than she realises.

I'm so lucky to be doing something I enjoy (99.9% of the time 😃). And yes, I started this job c 15 years ago to get extra money to pay for things for the children.