How to make a side hustle work for you – what you need to know about taxes, budgets and marketing
A side hustle can be a good way to earn extra income while also helping you upskill and be your own boss
Household bills are set to rise in 2025 with higher gas and electricity costs and rising taxes. This may make the new year the ideal time to start a side hustle to boost your income.
A side hustle is a way of earning extra income in your spare time. This could be by selling items online or using your existing skills such as creative writing or crafts. It can also be a good way of earning passive income, such as renting out a room or space on your driveway. After the initial setup, you could start receiving regular payments on a monthly basis with little effort.
A side hustle can use your hobbies to supplement your income and if you earn enough money, it could one day even replace your full-time job. It can also add variety and freshness to your routine, especially if it’s different from your day-to-day job.
Andrew Procter, chartered accountant and director at Tyrell Procter, says: “It can potentially enhance your physical and mental well-being – for example, dog walking combines exercise with a sense of purpose.”
Emma Jones, founder of small business support platform and membership community Enterprise Nation, explains that starting a side hustle gives you the freedom to test a market without taking on investment.
It can also give you an insight into the cut and thrust of running your own enterprise, while you have the security of a salary coming in, she adds. “One of the things that often holds people back from starting a business is the anxiety around giving up a day job.
“Our own research has found around 54 per cent of businesses are now started as a side hustle and the advantages of starting in this way means more people than ever before expect to start a business at some point in their career plan. A third are started to provide extra income to cope with rising costs. But around 27 per cent are started to fulfil a dream to become your own boss."
Here is how to make a side hustle work for you
Do your research
The most common reason why people start a side hustle is to earn extra money, but some people also use it as an opportunity to turn a hobby into a source of income and it can also be a great way to test the waters for a new career.
Procter days: “By exploring whether there’s a market for your idea, you can gradually shift your focus, devoting more time to the side venture as it grows, until it eventually becomes your main job.”
Jones suggests testing products on family and friends and researching the competition.She says: “How do they do things, and how can you do things better or more efficiently? Is there a demand for your product or service? What would people be prepared pay for it? Then work out if that allows you to make enough profit to get through to the next level.”
Upskill and network
Running your own side hustle doesn’t have to be lonely and you can learn a lot from others, which may even boost your brand. Watch out for free events on Facebook groups or other social media. For example, Enterprise Nation runs daily Lunch and Learns.
Joining free local groups and attending after-work events is a great way to learn and explore in the business community.
Make sure you get paid
Having cash in the bank means you are less likely to have to need expensive finance. Jones says: “If you’re using marketplaces, the cash comes through automatically, but if not, get used to regularly invoicing, and chasing relentlessly as well as using accounting software which can help with this
Use social media
Social media can help you reach a wider audience without requiring a massive marketing budget. Jones says: “Reaching a wider audience straight away without having to invest in a huge marketing budget is now more accessible than ever.
“Many side hustlers now use social commerce, where they share content and sell their products on their Instagram or Tik Tok account.
“Or this can be done via powerful global marketplaces like Amazon, Etsy and eBay. It’s a fast way to get going without having to initially invest in your own digital ecommerce software.”
Side hustle tax
One downside of a successful side hustle is that you may start owing money to the taxman.
That could mean filling out a self-assessment tax return. These need to be filed and any bills paid to HMRC for the previous tax year up to 5 April by paper at the end of October or by January online.
Toby Gallon, partner in private client tax services at Evelyn Partners, says many taxpayers are unclear if side hustle income should be declared. He explains: “If the money raised was in the nature of a trade, then it is taxable.”
There is a £1,000 trading allowance for items or services sold online though. That means you need to declare any revenue above £1,000 and profits in a self-assessment tax return.
Jones adds: “It’s a good idea to keep records of your sales and transactions, even if they are under the £1,000 limit, just in case you’re asked to produce any proof of your income.”
Alternatively, Procter says: “You could set up a limited company to earn this income, but you wouldn’t benefit from the trading allowance and would need to pay dividend tax to extract the earnings, as well as corporation tax on the business’ profits.”
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