People nowadays are inclined towards finding new and easy ways to make a living by earning more. This makes them choose to work for additional income sources even after maintaining a full-time job. Sometimes people do it for their passion, to keep it alive and growing intact. On the other hand, some people do extra income to add to their earnings and make some extra pounds to make life better. In the UK side gigs are a popular way to add to your income sources or to pursue a dream through it. The question that arises here is what are the tax implications of side gigs?
It sounds good to people to make earnings from side gigs, however, people often do not focus on the tax implications that side gigs might bring for them. People are unaware of the fact that side gigs can also be associated with tax liabilities. In the case you think to keep it hidden and do not plan to declare your extra income to HMRC, you will be in trouble when the investigation is called by HMRC. You do not need to worry as we have got you covered with the basics of side gigs and the relevant tax implications in this guide.
Get in touch with one of our young and clever experts to learn more about the tax implications of side gigs. We will try our best to provide the best possible solutions to your queries.
Introduction of Side Gig
When you have a normal employment status but you do aim to add to your income to make a living or to pursue a dream by having an extra part-time job. That is something you maintain with your full-time job and we consider it as a side gig. Nowadays, side gigs and other freelancing projects are famous among people in the UK. Other than the main job earnings, if you aim to make a few pounds, you can opt for side gigs or freelancing projects.
Especially for youngsters, side gigs are a great way to pursue a dream and even get the benefit of extra income out of that. Let’s take an example of an individual who works as a receptionist at a company as a full-time job. In his spare time over the weekend and other days, he manages to do twitch streaming because of his passion. Now the way to pursue a dream is as beneficial as making extra pounds from that.
What are the Tax Implications of Side Gigs?
People need to educate themselves about the fact of side gigs when they are inclined towards making extra money. Many of you must be unaware of the fact that side gigs are associated with tax implications also. Do not plan to hide your extra income from HMRC and do not plan that you are not going to declare it while filing the tax returns. This will call for a serious investigation against you by HMRC and you will have to face unfavourable consequences and pay hefty fines issued by HMRC.
Moreover, when you are a part of normal employment through the PAYE system, your tax sections like national insurance and income tax are already made from your salary. You do not have to put in the effort to do any process. However, when you are making extra pounds from the side gigs, you will be solely responsible to pay the tax to avoid any unfavourable circumstances in the future.
Declare Your Additional Income to HMRC – Why Do I Need to Do that?
Since your income from side gigs is considered untaxed, you will have to make the effort to declare it to the HMRC so that the tax implications can go functional accordingly. If you fail to bring it to the knowledge of HMRC, you will be issued hefty fines and additional interest if you delay the payment. Sometimes, the mismanagement makes you pay even more than you pay in the amount of your tax bill.
Moreover, it is imperative to know that if the income from your side gigs is less than what you are getting in the personal allowance, you do not have to worry about the tax implications. Because you are not paying tax until your income does not go over the amount of your allowance. Also ensure to keep a record of your receipts, bank statements and other relevant documents to prove how much have you made from the side gig in a tax year.
How Much is My Tax Bill if I Declare Additional Income?
It depends on the amount of money you are making from the side gig that will help to decide what will be the amount of national insurance and income tax. Also, consider what you are already making from your main job. There is a chance of considering overall income and this can push you to a higher tax bracket. This means you will have to pay more tax if your overall income from the main job and side gigs go over a certain limit threshold.
The Bottom Line
Now that you have gathered a fair amount of information about the tax implications of side gigs, we can bring the discussion towards wrapping up. We can say that side gigs are a popular and equally good way to pursue your dreams and make extra income, however, you will have to declare your income to HMRC. This will also result in paying more tax and there is a chance for you to fall in the higher tax bracket if your overall income is crossing a certain limit. We hope these few minutes of reading will help you to handle your tax implications professionally.
Disclaimer: The information about the tax implications of side gigs provided in this blog includes text and graphics in general. This does not intend to disregard any of the professional advice.