It is no secret that Christmas is an expensive time, from the cost of buying presents to the seemingly never-ending stream of food that needs to be bought.
Therefore, it is only natural that at this time of year, people will be beginning a side hustle to bulk up the bank balance before the most expensive season of the year commences.
However, understanding the tax implications of a festive side hustle can be tricky for those who have never had to complete their own tax filings.
Whether it is selling clothes on Vinted or selling homemade Christmas wreaths, income collected through a side hustle could be subject to tax.
If your Christmas side hustle brings in more than £1,000, you may need to register as self-employed and complete an annual Self Assessment tax return.
Side hustlers who earn between £1,000 and £3,000 no longer need to complete a full Self Assessment tax return and can now instead report earnings through a simplified digital service.
For hustlers who earn below the £1,000 threshold, they will not need to pay any tax in accordance with the UK’s Trading Allowance, which allows people to earn a gross of £1,000 on top of typical revenue streams.
On the other hand, if the side hustle earns over £90,000, you may need to register the business for VAT and begin charging VAT on services.
It is often the case that people with side hustles do not realise that they are liable for tax on their earnings.
However, it is imperative that side hustlers realise that they are liable for tax and that there are multiple ways that HMRC can determine this.
If no tax is paid ahead of the Self Assessment deadline, fines and penalties can be issued, some of which can even accrue daily.
It may be the case that tax is not owed. Even so, you must still submit a Self Assessment tax return, or else you could receive a £100 fine.
If you haven’t paid tax owed for a side hustle over numerous years, HMRC can force repayment of arrears.
When determining non-compliance, HMRC will use an automated system to flag discrepancies between bank records, declared income and lifestyle.
In the worst-case scenario of large-scale tax evasion, HMRC may criminally investigate you and prosecute you accordingly.
This makes speaking with an accountant when starting a side hustle all the more important.
Getting in touch with an accountant is one of the best ways to mitigate issues surrounding tax when you are running a festive side hustle.
We can help you to understand your tax position so that you are confident that you are acting within your level of income.
For support with tax on winter side hustles, get in touch with our team.
Jim Botton – Pleasure Beach (Skegness)
