Starting a side hustle can be an exciting venture that not only supplements your income but may also become your full-time gig in the future. However, before diving in, there are several important factors to consider. In this article, we will address the top 12 frequently asked questions about starting a side hustle and provide valuable insights from experts who have successfully scaled their own small businesses.
Why You Need a Business Plan
A business plan is a crucial step in preparing for success. It serves as a roadmap for your business and helps you identify blind spots. While each business plan will vary depending on the model, it is essential to document and plan the bones of your business, even if you already have customers lined up. Consider conducting a SWOT (strengths, weaknesses, opportunities, and threats) analysis to gain a 360-degree view of your company’s strengths, weaknesses, and potential risks.
Executing Your Business Plan
Once you have a solid business plan in place, it’s time to execute and validate your business idea. Acquiring your first paying customer is crucial as it confirms that your idea solves a real problem and that people are willing to pay for it. If you already have connections, leverage them to secure your first customers. These existing relationships offer a cost-effective way to increase business. If you don’t have connections, there are various strategies you can employ to find your first customer.
Tax Considerations for Side Hustlers
When it comes to taxes, the requirements for side hustlers depend on their earnings. Most individuals with a side hustle simply register for Self Assessment. This involves calculating and paying income tax and National Insurance (Class 4) based on the earnings and submitting a Self Assessment tax return form electronically by January 31st each year. It’s important to keep track of the income tax and National Insurance paid through your wage to determine the amount owed. Additionally, it’s crucial to differentiate between casual income and profit, as tax obligations are based on gross sales.
While there is no way to claim tax back on expenses for casual income, registering your side hustle as a business can provide more tax benefits. Even if your income is under £1,000, registering as a business may help you keep more money overall. HMRC recommends registering your side hustle as a business, irrespective of income, to ensure compliance.
Starting a side hustle requires careful planning, execution, and consideration of tax obligations. By creating a comprehensive business plan, executing it effectively, and understanding your tax responsibilities, you can set yourself up for success. Remember, a side hustle has the potential to become a thriving full-time business, so invest the time and effort needed to make it a success.
