Why does my side hustle tax bill seem so high?

[labtest57]

Hi
I am looking for some advice please. I work full time and pay paye tax on that job, but have been making extra doing surveys as a side hustle and this tax year have earned just over £2000. Today I attempted to fill in a sole trader tax return and the final calculation said I owed just over £800. By my calculations, with one thousand tax free and 20% tax on the rest, I should only owe £200. I have contacted HMRC and am passed from pillar to post and still none the wiser. I had to give all full time job info but surely that ia irrelevant anyway.

OP you must be very confused. A lot here is correct, but other comments plain wrong. No-one has yet been able to explain the £800 tax bill. Could I recommend you contact the charity TaxAid. You are within their remit for free advice. They will be able to help explain or correct your position.

And I should have said in my previous post, utmost respect for doing the right thing and wanting to pay the right tax on this income!

Youve used your allowance for your full-time job. You should be paying 20% of the 2000 but your a sole trader so you can takeoff expenses. Say you’ve got expenses of £500 petrol or travel expenses materials you might use Internet use whatever else you use that brings it down to 1500 you’ll be paying 20% of that which is £300.

You are getting confused. If you earn less than £1k a year on a side hustle, then you do not need to register as self-employed.

Since your earnings are over that, you do. If it was your only source of income, then it would be tax free up to your personal tax allowance. However, since your personal allowance is all used up by your regular job, you have to pay tax on all of it. The general advice self-employed people are often given is to set aside a third of their earnings under the assumption that it will need to go in tax.

I just checked myself and I’m probably wrong. HMRC has a section on guidance for people with a side hustle Have a look at that.

No. I am definitely correct in the fact that I am only eligible to pay tax on anything over the thousand which in this case is £1000.

Don't advise people unless you know what you are talking about. You can't claim petrol or travel expenses for taking online surveys in your own home. You have to actually be doing the travel for your 'side hustle' in order to claim the expenses for them. Anyway, she's already mentioned she's used the Trading Allowance, you can't claim that AND other expenses, it's one or the other.

OP,

1. you are correct on your assessment. 2K-1k trading allowance, 20%tax on the remaining 1k
2. the only form you should have competed is the main SA100 return. You should have put the 1k in the “other income” box. Thats it. Super simple.
3. The advice to register as a sole trader was incorrect or misunderstood.
4. Despite this no one on here will be able to help you understand why the tax is so high- either post a copy of whatever forms you filled out and/or your tax calculation from HMRC or seek external help.
5. Either way, if I were you I would contact HMRC and tell them you filed in error and seek advice on how to retract the submission and submit the SA100 as above.
6. finally, if this is for tax year 25/26, you have until Jan27 to file. Use the time to understand your position and save for your tax bill. All you are doing by filing so early is losing interest in your tax money.

I suspect that whoever you spoke to at HMRC didn't quite understand. Depends what you said to them and how it was interpreted by them. You are not a sole trader, but are receiving other income which isn't taxed at source, hence the need for self-assessment

This

Do you have pension contributions deducted from your salary? If so are they deducted from gross or net pay? If deducted from gross have you entered the taxable salary from your P60 or your gross salary

So HMRC told you to register as a sole trader?

I'm pretty sure they're wrong

I'm battling tax form today and I think the issue is their unclear advice to be honest

Lord knows who they've got on the phone these days. Then again, I'm unclear what I'm suppsed to do by looking at their written advice

Also, I think they are contacting everyone who earns over £10,000 which does not fit with the tax free allowance. I know a couple of people who are being asked to fill in a tax return when they probably don't have any tax to pay.

editing to add - the reason I've mentioned that is I suspect there's some kind of shakeup going on at the tax office and the advice people are giving out is probably incorrect because the staff probably can't keep up with changing tax advice either.

but with regards to the side hustle, yes I thought you got a portion of that tax-free.

For just doing surveys they shouldn't have told you to register as sole trader. I did surveys for about 13 years alongside a PAYE job and HMRC told me to declare the survey income under self assessment. A couple of years ago I was made redundant from the PAYE job and started doing microtask type work for AI companies and when I checked with HMRC, since I was getting paid regularly for it (albeit differing amounts) I was told to register as sole trader so I did. I now just declare any earnings including surveys and market research stuff as well as the AI work under my sole trader account.

Hussle 🤮

It was the SA100 I filled out and there is no option to just go straight to the other income section. I had to give all my PAYE information too, and thats the issue.

You always include your PAYE info from your P60 under the primary employment section so that shouldn’t “be the issue”. Unless you’ve double accounted or something?

I definitely havent double accounted. I'm going to have to get tax scout to do it for me. It shouldn't be this complicated

You might feel less nauseous if you spell it correctly.

The tax return should have your paye income in it.

did you check the tax deducted from your paye code? It's not always correct

Hi OP - there’s been some mixed advice on here. HMRC aren’t advisers so their advice shouldn’t be relied on, unfortunately.

This would usually go under miscellaneous income, rather than trading income. My understanding is that you can notify HMRC via your online tax account rather than do SATR - https://www.gov.uk/check-if-you-need-tax-return

I would suggest you check your PAYE income and tax deducted for the year, as it’s not always correct and could be the source of your extra liability.

Payments on account are only due when the tax liability for the year is over £1k, so won’t be that.

There’s is no way £800 on a 2k profit is ‘normal tax’ when you only earn £24k on your PAYE income. Why people are arguing it sounds reasonable god only knows.

There is so much misinformation on this thread - it annoys me so much how complicated tax is!
My advice OP is to use ChatGPT or Gemini (start by saying ‘You are a U.K. tax payroll expert- then give it all your numbers) and ask as many questions as you want before you pay someone to do it for you. It will work out the tax for you and you can ask what boxes on the form the numbers go in etc. You may even be able to ask if why the form has calculated your tax incorrectly.
Anyway - your tax is wrong! Your calculations are correct - unless you haven’t paid enough tax through your main job PAYE this year (or money owed carried forward from last year).
Or you owe tax on something else - like savings interest or dividends etc (these do have separate allowances as well and this is unlikely the reason as HMRC wouldn’t be aware of them yet).
As you already know but others appear not to:
Anyone who earns over £1000 has to declare it to HMRC.
Most paying companies/websites report this to HMRC so you may as well sort it out before this.
Anyone earning extra money from ‘side hustles’ can claim either their expenses or the £1000 trading allowance to reduce their profit. YOU CANNOT CLAIM BOTH - so whichever is higher. This cannot be claimed against any main job PAYE earnings.

I wouldn't advise using anything other than the official HMRC website.