The latest research by tax specialists, RIFT Tax Refunds, has revealed that London is home to the highest number of people who currently have a side hustle in order to help combat the cost of living crisis, with the average side hustler in the UK boosting their earnings by almost £4,000 with the help of this secondary income.
It’s thought that as much as 25% of the UK population have an secondary source of income in addition to their full-time job, otherwise known as a side hustle, with some of the most common side hustles being craft businesses, investing in stocks and shares, blogging, social media and, more recently, adult entertainment platforms.
That’s an estimated 13.7m people clocking an average of six to 15 additional hours of work a week to help make ends meet, with London (2.1m), the South East (2m), and North West (1.4m) home to the highest number of side hustlers when splitting the UK by region.
With the average side hustler earning an additional £5,964, that boosts their annual gross earnings from £33,402 per year to £39,366. This means that they earn an annual net income of £30,458 after tax, netting an additional £3,981 net income from their side hustle.
That is, if they’re declaring their side hustle to HMRC.
Whether you’re a contractor, freelancer, or working full-time for two companies, it’s against the law to fail to declare a secondary source of income and doing so could find you in hot water with HMRC.
What many people don’t realise is that your personal tax allowance of £12,500 only applies to the job you earn the most money from. This means that you pay the basic rate of 20% on any money earned via your side hustle and what’s more, a secondary income could tip you over the threshold into a higher tax band.
This means if your side hustle pushes your annual income above the £50,271 threshold, you are then required to pay the 40% rate of tax on your total income, climbing to 45% if you earn over £150,000.
So is it worth it?
With the average person making a combined gross income of £39,366, having a side hustle doesn’t push them into a higher tax bracket and so the £3,981additional net income they make can go a long way when combating the current cost of living.
Even after paying tax on the money generated via your side hustle, this average income boost is equivalent to 160% of the average energy bill for your home, 950% of the average water and sewage bill or 136% of the average household’s food shop for a year.
It could also cover 25% of your yearly mortgage costs, or 28% of the average annual cost of renting.
CEO of RIFT Tax Refunds, Bradley Post said, “For many, a side hustle often starts out unintentionally, as a hobby, or as a one off project, and so the thought of paying tax on these additional earnings doesn’t always register straight away.
However, it’s not uncommon for a side hustle to develop into a legitimate source of income for those who devote the hours into developing it and, in doing so, they can bring a healthy boost to their annual pay packet.
It’s also no surprise that in the current economic climate more and more people are turning to a side hustle to help boost their earnings to combat the cost of living crisis.
The additional money earned is unlikely to push you into a higher tax band and so it can still be a worthwhile endeavour, even after paying the tax due. But failing to declare a secondary income can see you in some very hot water with HMRC and so it’s ill advised to run the risk, as they are inevitably going to catch up with you.”
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