You’ve been sitting on a business idea that you’re eager to put to the test. Or perhaps now’s finally the time to start making some extra cash from something you love. If this sounds familiar, then welcome to the increasingly popular world of the side hustle, where you can give it a go, without giving up the day job.
But what exactly does it take to run a business on the side? What’s the best way to get started? And what should I do about taxes? For these and lots of other questions, Mint Formations has you covered. Read on for everything you need to know to get your side hustle off to the right start.
Understanding the Side Hustle Concept
A side hustle is basically any extra work you do to earn money outside of your main job. It’s more popular than you might think: 2024 research from financial comparison site, Finder suggests that 43% of Brits have a side hustle on the go. Here are three of the main reasons why:
Boosting your bank balance
Finder discovered that the average income from side hustles is £207 per week, or £900 a month. Especially as the cost of living crisis lingers, a side hustle provides an obvious and very welcome way to relieve financial pressures or top up savings.
Testing the waters
Apple, Facebook, Etsy, Yankee Candle: all these global giants started out as something on the side. The beauty of a side hustle is the ability to test a business idea in a low-risk way before you commit full-time.
Developing your experience
Around two in ten Brits have a side hustle, but this rises to 68% for Gen Z. Let’s say you’ve landed a job after Uni, but it’s not really what you want to do. Freelancing in your spare time is an excellent way to build experience and bolster your CV.
Top Side Hustle Ideas
Side hustles come in many forms. Here’s some inspiration to see what we mean…
E-commerce side hustles
Almost half of side hustle businesses involve buying and selling things online. It’s not hard to see why: platforms such as eBay, Instagram Shopping, and Facebook Marketplace make it possible to get up and running quickly and easily, and potentially reach huge numbers of customers. Here are a few ideas:
- Monetise your craft hobby by selling handmade items on Etsy
- Sell your pre-loved or vintage clothing (e.g. using Vinted). If you’ve got a good eye, you can source additional items for resale
- Selling personalised products: e,g, print-on-demand t-shirts or other accessories
- Monetise your podcast or YouTube channel – e.g. by teaming up with brands to promote their products
Services side hustles
Just a few examples of the vast range of services supplied as a side hustle include the following:
- Tutoring
- Interior design consultations
- Deliveries (e.g. through Amazon Flex)
- Pet sitting/dog walking
- Catering (e.g. cake making, or setting up a weekend coffee stall)
- Renting out a spare room (e.g. Airbnb)
- Photography/art commissions
- Personal training/fitness sessions
Freelancing side hustles
Freelancing is a tried-and-tested way to monetise your professional skills working for other businesses in a way that’s flexible and usually project-based. Here are some common examples:
- Software development and design
- Website development
- Creative projects (e.g. logo design, photoshop editing, video and animation)
- Cyber security (e.g. penetration testing)
- Market research
- Writing, translating, and proofreading
- Providing training and development
Starting a Side Hustle in the UK
Here are our tips for getting your business started, while staying on the right side of the law…
Is the idea viable? Do your research
If it can generate a profit, it’s a potential business; if not, it’s just a hobby. From the outset – and certainly, before you start laying out any money for equipment, stock, etc, you should do your research to check if your side hustle idea is doable.
For instance, let’s say your proposed side hustle involves offering yoga sessions. What are the options and likely costs for hiring a space? Is there a demand for the service in your local area? What can you reasonably expect to charge per session? Social media platforms can be ideal both for sounding out your potential audience and for building up initial interest.
Avoiding difficulties with your current employers
As a rule, there’s nothing to stop you from having a side hustle, so long as you run it outside of your normal working hours for your main employer, and the activities involved do not breach your contract of employment.
If you’re a firefighter and you want to run a dog-walking business on the side, that’s fine. If you work for a software development company and your side hustle involves freelance app design, you could be in breach.
Always check your existing contract of employment beforehand. There are likely to be clauses preventing you from doing anything which competes with the business of your employer, and possibly a prohibition on doing anything that impacts your employer’s reputation. In short, make sure there’s no overlap between what you plan to do, and your employer’s business interests.
Choose a business name
A good side hustle business name will encapsulate who you are and what you do. It also helps if the name is unique and catchy to grab your audience’s attention.
You should also make sure that the name you want won’t lead to confusion or cases of mistaken identity with existing businesses. Tools to help you with this include the Shopify website domain name checker tool, which lets you see whether the website domain for your chosen business name has been taken already. You can also use the Mint Formations company search tool to see if the name is already in use by another company.
Choose a business structure
Most side hustle businesses are structured in one of three ways:
Sole trader
This is the kind of default setting for someone starting a side hustle in the UK. Basically, if you run your own business – and it’s not through a partnership or a limited company – the tax man designates you as a sole trader.
As a sole trader, you need to register as such with HMRC. Each year, you tell HMRC how much income you have earned through the self-assessment tax return. You pay any tax due (see below), and keep the remaining profits. This model also means there’s no separation between you and your business: you are personally liable for all debts the business incurs.
Partnership
A partnership structure can be the way forward if you’re starting a side hustle with other people. It’s similar to the sole trader model, except that partners share control, responsibilities, profits, and liabilities according to the terms of a partnership agreement.
Partners must each file their own Self-assessment tax returns each year, where they account for their share of the profits. Partners are ‘jointly and severally liable’ for the business’s debts, meaning a creditor can pursue one or all partners for any debts due.
Limited Company
By registering your business as a limited company, your side hustle can exist as a separate legal entity (i.e. you and your business are no longer the same thing).
Setting up the side hustle as a company lets you use the ‘Ltd’ or ‘limited’ assignation after the business name; something that can help to give the business added credibility and professionalism in the eyes of potential customers. The limited liability element can be attractive for company owners, too; as a director and shareholder of your own company, you are only liable for the company’s debts up to the amount you have invested or personally guaranteed.
Tax-wise, the company pays Corporation Tax on its profits. There are various ways to extract profits from your own company, including a combination of share dividends, salary, pension contributions, and reinvestment in the business itself. Compared to operating as a sole trader, and depending on your personal circumstances (e.g. how much you earn from your ‘main’ job), setting up as a limited company can provide lots of scope for tax savings.
Managing HMRC and Side Hustle Taxes
- Record keeping. Make sure you keep a record of all customer receipts invoices and expenses (you’ll need to refer to these for your tax returns)
- Registration. When you earn more than £1,000 in a tax year (from 6 April to 5 April), you must register for Self Assessment by the following 5 October
- For a new company, the Corporation Tax return (CT600) must be filed within 12 months after the end of the company’s accounting period (the first accounting period starts when the company begins trading – and the end date of this
- period is typically the anniversary of the last day of the month in which the company was incorporated)
- If your taxable turnover is more than £90,000, you will need to register for VAT
Why You Should Choose Mint Formations for Your Side Hustle
When it comes to choosing a business structure for your side hustle, it’s not a once-and-for-all decision. It’s very common for business owners to start off as a sole trader and then switch to a limited company. And with 20+ years of experience, Mint Formations can take the stress out of all aspects of company formation – with all paperwork handled. To explore the best option for you, take a look at our company formation packages.
Success Stories and Testimonials
FAQs
What is the best side hustle to start with?
The options for side hustles are endless, and there really is no ‘typical’ or ‘best’ one! A good starting strategy is to focus on an area you are passionate about or something that builds on your existing skillset.
How do I start a side hustle in the UK?
Do your market research, and go ahead and do it. Just remember that if you earn more than £1,000 in a tax year through your side hustle (from 6 April to 5 April), you must register for Self Assessment by the following 5 October).
Are side hustles worth it?
They can be, yes. Two in Five Brits have side hustles on the go, and the average monthly earnings from businesses on the side is £900.
What is a side hustle?
A side hustle describes any work you do and the money you earn outside of your main job.
What is a good side hustle?
A good side hustle is one that you can manage without it encroaching on your main job and that turns a profit.
Success Stories and Testimonials
Find out how we can help
Want to discuss the best way to monetise your business idea? Wondering about your options for structuring your business for maximum tax efficiency while you stick with your main job? Mint Formations can help. To tap into our expertise and explore what’s possible, speak to us today.
