Five Ways To Manage Your Side Hustle Finances Efficiently

According to finder.com 44% of Brits have a side hustle with the average income at £206 a week, or £10,701 a year. For those in Gen-Z this number rises to 76%. Side hustles can be anything from selling crafts at local fairs and on Etsy to teaching level 5 TEFL course‘s online. Like a lot of bloggers and content creators I fall into this category too, as my blog is a side hustle that I do alongside a full time job. So if you’re like me you’ll need to make sure you manage your side hustle finances efficiently.

Most of us who have a side hustle do so because it’s a bit of extra money to help pay the bills and do nice things. And managing your side hustle finances is crucial to achieve your goals, and make sure you’re not caught up.

Know your tax obligations

It’s so important to know about your tax obligations if you have a side hustle.

The Trading Allowance allows people to earn up to £1,000 a year from a side hustle without needing to declare it or pay taxes. If you earn more than £1,000 then you’ll need to register for self-assessment with HM Revenue and Customs (HMRC) where you’ll pay any tax owed.

Just because you earn over that amount doesn’t necessarily mean you will have to pay additional tax as there are factors that come into it such as your expenses for the side hustle etc.

Each year you’ll have from the end of the tax year (early April) until the end of January to submit your taxes. You’ll declare what you have earned, what your expenses are and a selection of other information. For example as I am employed I have to input all of the information around my full-time job and the tax I pay there.

Keep your side hustle finances separate

Having a clear separation between your personal money and your business money is essential. It’s worth having a separate business account that all payments are paid into, and all expenses are paid from.

Keeping things separate will help you with record keeping when you’re looking into money coming in and out for your business. If you have everything in one account it can become a lot more complicated.

I chose a Monzo business account as I have it set up that 20% of all money that comes in is automatically put into a separate pot so I have money aside for taxes.

Keep track of your income and expenses

Rather than waiting until the end of the tax year and having to go back through a years worth of accounts, keep track early. I have a simple spreadsheet where I record all of the money that comes into my account as a business. For me this is through blog content, blogger outreach and the occasional social media collaboration.

Then as well as money in, track any expenses you make in association with your business. So if you have to spend money on something solely for your business you can track it. And for anything that is partially used as a business for example internet bills you can record a percentage as an expenses.

Ensure you know deductions for your side hustle finances

If you’re in the UK then make sure you know how to optimise your tax savings through deductions. But ensure you only consider the ones that are truly relevant to you. Some to consider include:

• Home office deduction. If you have a dedicated space in your home used exclusively for your side hustle then you may be eligible for a home office deduction. For example if your home has five rooms and one of those is a dedicated side hustle space then you can deduct 20% of your rent/ mortgage, council tax and utilities as an expense.
• Business supplies and equipment. Anything you buy solely for your business can be deducted as an expense. For me this would include things like photography equipment, backdrops etc
• Advertising and marketing costs. If you promote your side hustle in order to generate income then the costs are tax deductible. This may include social media advertising, business cards, or attending a networking event.
• Travel expenses. If your side hustle requires travel (for example you’re a photographer) you may be able to claim deductions for certain expenses. This includes train tickets, or mileage when travelling for business purposes.

Take a look at the HMRC guidelines for more information on tax deductions. By including all of your expenses when submitting your taxes, the less you’ll have to pay. But you need to follow the rules.

Set aside tax money

Unlike traditional employment when taxes are automatically taken out of your pay, you will have to make a single payment for any side hustle tax. So don’t leave it until the end of the tax year to save to pay your bill.

Every time you get paid put aside 20-40% (depending on the tax bracket you’ll fall into). This way when it comes time to pay the bill you’ll have enough to clear it in one go. And depending on your expenses you may get some back for yourself.