Self-Assessment Tax Return for Side Hustles Explained

Do you have a side hustle? Side hustlers usually need to file a self-assessment tax return for side hustles. If they operate online stores, do freelance work or drive for rideshare platforms. The United Kingdom has many workers who supplement their employment earnings with side income. Yet, several people remain uninformed about tax obligations for these additional earnings. You will find essential information about earnings reporting with penalty avoidance guidance within this blog.

Reach out to one of our professionals to get to know about self assessment tax return for side hustles. Get in touch with us, and you will be provided instant professional help!

What is a Self-Assessment Tax Return for Side Hustles?

A self-assessment tax return for a side hustle is a process where individuals report extra income earned outside their main job to HMRC and pay any due taxes. It applies if side earnings exceed £1,000 in a tax year.

Do You Need To File A Self-Assessment Tax Return?

Only those who receive income from their secondary business exceeding £1,000 are required to file a tax return. You need to file a self-assessment tax return for side hustles when any of these conditions apply to your situation.

You generated earnings from your side business that exceeded £1,000 within a tax year.
If you have chosen self-employment or you operate as a freelancer, you need to file a self-assessment.
Your side income from selling online, as well as rental properties and investments, remains untaxed.
All foreign income that you receive must be recorded.

You need to register for self-assessment in cases where these conditions apply to your situation.

How to Register for Self-Assessment Tax?

New self-assessment applications must complete their HMRC registration by October 5th of the year they earned taxable income. The HMRC website provides an online platform to accomplish this registration process. The unique taxpayer reference number (UTR) will be given to you after registration at HMRC. You need this number to file your tax return.
Here is the complete guide for How to File Self-Assessment Tax Return

How to Fill Out Your Tax Return?

Reporting your side income taxes is simpler than most people expect. Here’s a step-by-step guide on how do I fill in a self-assessment tax return.

Gather your Documents:

You need official proof of your earnings through invoices, bank accounts and transaction reports.
Enter every expense directly linked to your business activities.
Your UTR number and National Insurance number.

Log in to HMRC’s Online Portal:

Here is your UTR number helpful for you. You can enter your tax account through Government Gateway using your login ID.

Report your Earnings:

Provide comprehensive information about all funds you receive from your side-project.

Deduct Allowable Expenses:

You can lower your taxable earnings by deducting the prices of your office materials along with workplace tools and promotional costs through self-assessment tax relief for remote workers.

Submit Your Return Before the Deadline:

To avoid the penalties, you must follow the self-assessment tax return filing deadline.

Paper returns: Due by October 31st.
Online return: Due by January 31st.

How Much Tax Will You Pay?

You must be able to pay your tax to the HMRC. Your tax rate depends on your total income, including both your main job and your side hustle:

Income below £12,570 goes untaxed under the Personal Allowance rules.
For salary bands between £12,571 and £50,270, you will pay a 20% Basic Rate tax.
You will pay the 40% tax rate when you make between £50,271 and £125,140.
Any amount earned after £125,140 requires a 45% tax payment known as the Additional Rate.

For more details, visit https://www.gov.uk/income-tax-rates

What Happens If You Don’t File Your Tax Return?

The failure to submit taxes by their deadline results in HMRC issuing fines together with delayed return penalties.

Late submissions, up to 3 months, will incur a £100 fine on this delay.
Taxpayers who file their return after 3 months face additional daily penalties in addition to paying interest on their tax debt.
Penalties for submitting incorrect information may include fines amounting to 100% of the unpaid tax.

Can You Reduce Your Tax Bill?

Yes! There are several methods which can help you lower your tax expenses.

You can reduce your taxable income by taking advantage of all eligible costs.
You can claim the HMRC trading Allowance of £1,000 when your business profits remain under £1,000.
A pension scheme contribution will help decrease your taxable income.

Maintaining precise records helps taxpayers prevent paying more tax than necessary.

Need Help with Your Self-Assessment?

We exist to assist you in understanding the self-assessment tax return for side hustle procedures because they present confusing challenges. Our team assists with:

Registering for self-assessment.
Filing your tax return correctly.
High tax relief combined with reduced tax payments.
Avoiding penalties and late fees.

Conclusion

Extra earnings from side business activities provide numerous benefits, yet they still require the acknowledgement of tax obligations. Side hustle owners must prepare a self-assessment tax return for side hustles when their earnings exceed £1000 annually. One can achieve tax filing without stress by staying organised while claiming all expenses and fulfilling deadlines. Rely on professional tax help if you require assistance to perform your side business operations properly.

Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.