A side business (or the buzz-worthy ‘side-hustle’) is not an uncommon pursuit for those already employed in the UK. In fact, recent studies have revealed that over a third of workers pursue more creative pursuits in their off hours. And get paid for them.
The income generated by these side businesses contributes an impressive £15 billion to the British economy each year. There’s a number of factors that keep these side hustles running, but the majority reports that it’s not about the money but about their passion for what they do. However, 10% do plan to eventually shift their focus and efforts 100% to their side business.
So what kinds of side businesses are most popular? Creative endeavours reign, with food, gardening and photography being the most popular. Knitting isn’t far behind.
Why are side hustles so popular?
A number of factors have contributed to the growth of side businesses across the UK. The main contributors include:
Accessibility Those starting a business in their free time often have time and location restrictions. In other words, these businesses are often started out of homes. The internet not only provides location independence and the ability to launch a business from anywhere, it also offers endless resources and tools specifically for side businesses.
It also provides businesses with a massive platform to begin marketing and selling their product or service.
With online options for managing your business, it also means that all of your data is at your fingertips at any time anywhere. Accounting and invoicing software in the cloud, for example, means that you can manage your invoices and payments from any device with only internet access.
Low costs Partly due to the range of free resources available but also thanks to the potential for the tax advantages available to sole traders, initial start-up costs and tax can be quite low. This means that earning back any investments can happen quicker and can turn into profit.
A personal touch The recent consumer backlash towards large corporations pumping out mass-produced products means that smaller businesses now have a leg up. Bespoke, artisanal, limited - these terms are what consumers are looking for today. Ideally suited to the sole trader.
HMRC’s Second Incomes Campaign
Recognising the increase in side businesses, in 2014 HMRC launched the Second Incomes Campaign to address the second income generated by these businesses. Depending on the type of business, they could qualify to be untaxed under the campaign.
Types of businesses that are accepted to the campaign include:
- Any income from services such as driving taxis, fitness instruction, hairdressing or gardening
- Any fees for training services or instructional speaking events
- Any payment for entertainment or event or party planning
- Any income from selling products produced by creative business undertaken in free time
- Any profit that comes from selling items at market
HMRC also provides useful guidelines for determining whether your side hustle is considered a hobby or is a business. These guidelines take into account:
- The size of the business and the frequency of sales
- The amount of time spent on the side hustle
- Your customers: are they more than just family & friends?
- Whether you’re pursuing the side hustle with the intent of making a profit
- Whether standard principles of running a business are applied
Does it sound like your side hustle qualifies? To learn more about the Second Incomes Campaign and apply, notify HMRC and follow the steps provided in their guide.
Managing your second income with accounting software
With a side hustle comes the central pillars of running a business, even a small one: invoicing and accounting. Today, many online softwares are created to meet the needs of these types of businesses.
Debitoor accounting & invoicing software is designed specifically with the sole trader in mind, by providing intuitive software that’s simple to use even for those without a background in managing business finances, making it easy for you to stay on top of your side hustle accounts and invoicing.