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.

What about someone who has 2 jobs? 2 different employments?
Should the second one pay no tax until it gets to £5000?

I do understand where you are coming from. I have several part time jobs and all my personal allowance is in one job. This means the other jobs are taxed across the whole salary. Its the same tax overall as having one job. But it really highlights how 'little' of each extra job you get to keep. I think its a reason people sometimes dont take on overtime as it you earn say £10.90 an hour and that particular 10.90 is taxed at 20% plus 12% NI plus 5% pension you keep £6.87 of it. Its not massively motivating.

I understand it completely. I own a limited company. I suggest it because OP’s side earnings are low enough to still take out the majority in dividends. Her partner/husband owning shares means he can also take out the same.

it’s legal to use a spouse’s tax allowance it? i agree with pp’s suggestion of using your oh’s

Yes I don't qualify for child benefit either so you pay in for years then earn 'too much' to get anything back. Except we have struggled with bills too

Yes they should get some tax breaks on second job too

It would be fairer to either raise the tax threshold by £5k for everyone, or to tax income from people renting out rooms in the same way as everything else.

Why should someone who is working really hard in one single job be taxed more heavily than someone who has income from multiple different sources?

Yes, it might be that you have taken on a second job because your family needs more income, but someone else might have worked really hard/put in extra hours for a promotion in their main job for the same reasons. Why should you get a tax advantage that they don't?

The benefit of working hard is in the extra income that it generates. I don't see why having to pay tax on that income is a disincentive... surely we would all stop working as soon as we hit the tax-free threshold if that was the case?

Of course, once you get to a point where you no longer actually need the extra money, there will be a cost-benefit analysis as to whether the income that it generates is worth the extra effort. But that is quite a luxurious position to be in, so I think it's perfectly fair to pay tax at a reasonable rate.

I used the Office of National Statistics for my research, but as you say, the sources vary wildly.

You'd think it would be a definitive calculation wouldn't you?

Yes but lots of people don’t understand that anything over £1k is still taxed the same as their income. So anything over £1000 will still have 40% tax taken in her case. any salary from the company will still be taxed the same as it’s on top of her 50k. That’s why we get all these ‘oh limited company = tax dodgers’ posts from others.

@HikingforScenery So when I register to pay tax I'd have to do in dh name? He's in 20% bracket

So you think someone earning £25,000 in 1 job and £5000 in another job should pay less tax than someone earning £30,000 in just 1 job?

Why? That does not seem fair, does it?

Why don't you qualify for CB?

Do you actually earn over £60k after pension deductions (so ...£65-70?) in your main job?

I can't believe you are crying over paying tax on your income tbh

She could set up as a limited company, have low earnings just pay corporation tax and take the rest as dividends.

No need to pay a salary

Or money laundering 🤷‍♀️

You pay tax on income; that's it. Sorry but I have no sympathy for you. I'm retired, I still pay tax as my income is more than the threshold. That is how tax works. And I never earned 50,000 quid a year, no where near it.

Base salary is 50k but I also earn commission and bonuses that take me to 60-65k usually. Obviously the tax man gets a large chunk of all of that too

Sorry - I forgot the Government keep changing the dividend allowance

Tax on dividends: How dividends are taxed - GOV.UK (www.gov.uk)

It was quite generous.

Now it isn't

You really can’t complain about tax and also want decent public services. Not saying you are but a lot of people seem to want others to pay for these things and not themselves

People always say this.

I have been working for myself from home for 20 years, way before the pandemic. It's a freelance sort of job, computer based, i'm not seeing customers at home, or buying/selling stock or anything like that. Insurance company in normal terms are not interested in that sort of business being run from home.

But if you go down the route of claiming a percentage of utility bills and mortgage etc you have to tell your mortgage lenders and insurance companies, and they may/will hike your premiums. This may be more than the savings. If you are turning over a large sum of money then yes it might be worth it, if you're not, and it's your main/only job it might not be. And paying an accountant - yes it's an option for your tac return, but again you have to balance the cost of hte accountant against how much tax you'd pay otherwise and how much they could save you.

Why is side hustle such an irritating phrase? Makes me cringe

As has been pointed out, you earn a good salary and you have more income.

We are taxed on our income.

I can see that it does seem unfair that some income, such as when you rent a room, is not taxed as much - but income through jobs is taxed.

Is this rule for everyone or just those who are doing it to make ends meet? How do they know who needs the money for basics and who is using it to say buy a new handbag/car or a luxury? Would those people pay the 40%?

if each income stream was taxed with a separate personal allowance and tax bands etc. everyone would be working ten jobs with various side hustles. It makes sense and is fair that they’ll tax you 40%… your income is considered as a whole.

Yes by people like you trying to avoid paying tax.

In my job customers also pay VAT does that mean my income shouldn’t be taxed too?