Do I Have to Register My Side Hustle as a Business?

Do I have to register a side hustle as a business?

Are you lying awake at night worried the tax-man is lurking around the corner because you should have registered your side hustle as a business? Well, worry no more!

In this guide, our accountants at JMC Accountancy will show you the rules you need to know about business registration, what it means for your taxes, tax code and what you need to do next.

When Do You Need to Register a Business?

You need to register as a business when the income from your side hustle goes over £1,000. Below £1,000 you can choose to take advantage of the trading income allowance, where UK individuals can earn up to this amount without letting HMRC know. It’s important to note that £1,000 relates to income, not profit and that it isn’t always tax-efficient to use.

So you should check whether using the trading allowance is right for you or if you should register with HMRC regardless of your turnover.

How to Register a Business with HMRC

Once your side hustle crosses the £1,000 income threshold, it’s time to register your business with HMRC. This means registering as self employed, which you can do online yourself by filling in the form on the HMRC website. I’ve put together a guide to registering as self employed where I show you the form you need to use and the 5 steps you need to take to complete your HMRC registration.

There are other business structures available, such as a Limited Company. And you may need to consider these depending on your intentions with your side hustle and whether you have business partners. If you do decide you want to form a Limited Company then you’ll need to do that straight away.

Ideally, this should have been done before you started working on your side hustle because you’ll need to send out invoices and open a business bank account in the name of your LTD which you can only do legally once it is registered.

What Happens Once You Are Registered as a Business

You are registered as self-employed, you’ll need to start letting HMRC know about your side hustle’s income and expenses. You’ll need to do this once a year by filling in a tax return. The deadline for filling in your return is 31 January each year, and you’ll also need to pay tax by 31 January and 31 July every year too. This process of reporting and paying tax is what is known as self assessment.

What Tax Do You Pay On Your Side Hustle?

When you have registered your side hustle with HMRC you’ll need to pay the following self-employment taxes on your business profits:

  • Income tax
  • Class 2 national insurance
  • Class 4 national insurance

The amount of each of these depends on how much profit your business makes and the income tax allowances you are entitled to.

If you are employed, then the amount of income tax you pay will be based on your combined income from your side hustle and employed job.

Toni Sculthorpe
Toni Sculthorpe

"Hi, I'm Toni, Director of JMC Accountancy Ltd. I was inspired to set up JMC after many years as an accountant and director with other firms. I wanted to do things differently and establish a modern, proactive team of accountants - one that small businesses need and deserve. Our ethos is built around really getting to know our clients and their businesses. We are not just here to make the numbers add up - we act as their business partner and take an active role in helping them to achieve their ambitions."

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