It begins in the same way to many folks in the UK: a hobby you enjoy, a craft you have perfected, or a little service you provide on the side starts to make actual money. The thrill of it can be overwhelming but only until it hits you that HMRC does not view your side hustle as your hobby. The accounting year comes and with it the dire necessity of having to worry about what to pay, what to claim, and how to be sure that you have done everything right. It is then that people realize the cost effectiveness of an accountant for tax returns when it comes to doing taxes, not as a luxury, but as a prudent protection of their time and sanity.
The reality is that side hustlers typically end up in tax trouble not through intentional bad action. It is more likely caused by either disorganized records, misinterpretation of rules or procrastination. To ensure you can cope with your hustle and stay financially in control without that yearly stress, these six moves can reshape your approach to it all.
6 Moves Every Side Hustler Must Take
Divorce your company and personal accounts sooner rather than later or you would have to sift through a year of jumbled statements. When you open a bank account specifically to account what you use and receive related to your hustle, you make your work traceable. This is your best defence in case HMRC ever criticize your return.
Transact and record it as you make them instead of months later trying to rely on your memory. Logging a sale or expense in a spreadsheet or simple accounting application only takes a minute. Being performed every day over an entire year, that habit saves hours of reconstruction work and decreases errors to a dramatic extent when filing time arrived.
See what the HMRC considers as income as well as what it does not. Many would-be side hustlers believe that a couple of minor sales will not hurt, but the regulations are more stringent than one would assume. The majority of untaxed income, whether it comes down to selling crafts on the Internet or taking up a couple of freelance projects, needs to be reported. Get this wrong and you may well be punished even over trivial sums.
Store all your receipts in a digital friendly manner so you are prepared to go Making Tax Digital (MTD). Paper deteriorates, is lost or can be easily damaged. Take a fast picture of each business transaction made and save them in a cloud folder; then you can quickly have documentation when HMRC requests evidence.
Save tax money during the year and then you will not have the panic in January. Way too many side hustlers use all of their money and then rush to plate up their bill. Using a set percentage of every payment into a different “tax pot,” you can make the deadline without depleting your current account.
Check your finances on a quarterly basis to be in control. Short review every 2-3 months helps you to fix mistakes early, modify tax savings, and keep in touch with any new guidance by HMRC. Such a consistent timing turns a filing to a handover, rather than a marathon.
Why call professionals?
Tax regulations relating to self-employed income are anything but straightforward even with the assistance of disciplined habits. A good accountant for tax returns can find deductions that you may not realize, get your records up to date with MTD, and safeguard against any penalty in the event of accidentally making an incorrect deduction.
Consider an example of jewellery maker based in London who started selling online in her free time. In her inaugural year, she underclaimed expenditure as she did not know some packaging and travel expenses were deductable. A year later with improved record keeping and the help of a professional she did better by 1200 pounds in her financial result without having to sell a single item more.
Building a Digital-First World
The Making Tax Digital initiative launched by HMRC is only growing in scope with an increasing number of self-employed taxpayers likely to pay update reports on a quarterly basis rather than annually. Such change will have minimal margin of shoebox accounting or late calculations. Executing these six moves now will make the transition painless, whereas those who did not pay attention to the trend will encounter additional stress and possible non-compliance.
Experienced accountant for tax returns by your side will mean you already have the clean digital records HMRC is looking for plus more time to develop your side hustle rather than be fighting paperwork.
Final Word
Side hustle ought not to be a winter nightmare, but rather something you are excited to do. Keep your finances separate, track income in real time, maintain evidence of spendings, calculate how much you pay in taxes, and review it on a regular basis, and you will have a system that will succeed year after year. Throw in the correct professional assistance and you will find that the tax season is just another one of many milestones in your life that you have successfully passed without experiencing any anxiety whatsoever.
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