SIDE HUSTLES UK: The COMPLETE Guide To TAX 2024 | Sole Trader vs Limited Company
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- Опубликовано: 1 авг 2024
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SIDE HUSTLE UK: Here is a Complete Guide to Tax for 2024 if you earn side (or extra) income or have a side hustle or business. Learn how much tax to pay, etc. Learn to Start or Grow your Side Hustle or Online Business with us at Financial Joy Academy FinancialJoyAcademy.com
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I'm married to Ken and we have two boys aged 8 and 6. I'm a Londoner, born in Hackney! :)
Day to day, I run the operations of The Humble Penny as a creative - doing everything from marketing to video editing. I studied Multi-media design and technology at Uni.
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I'm a husband to Mary and daddy first and foremost.
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★★ TIME STAMPS ★★
0:00 - Intro
1:11 - Agenda for today
3:28 - Sole Trader vs Ltd Co. Which One?
04:50 - PART 1: SOLE TRADER SCENARIO
6:49 - Exemption for £1000 Trading Income
07:23 - Income Tax Thresholds
08:13 - TAX Calculations for Sole Trader
10:21 - Allowable Expenses For Sole Trader
10:51 - TAX Calculations for Sole Trader continues
15:17 - National Insurance for Sole Trader
17:17 - Admin & Summary for Sole Trader
18:55 - PART 2: LIMITED COMPANY SCENARIO
19:47 - Allowable Expenses For Limited Company
20:50 - Income Tax Thresholds
21:10 - Dividends
23:04 - Dividend Thresholds
24:00 - TAX Calculations for Limited Company
28:27 - Salary vs Dividends?
29:15 - Admin & Summary for Limited Company
30:16 - Final Words
Best, Ken and Mary
#tax #sidehustleuk #sidehustle
★★ WHAT THIS VIDEO IS ABOUT★★
SIDE HUSTLES UK: THE COMPLETE GUIDE TO TAX 2022 
Хобби
Do you have any other questions on this subject of tax for your Side Hustle? Drop it below 😀
Thankyou, very informative and have also watched your suggested video on paying from a LTD company..
I'd like to know what Kemi's example above would look like if she followed a LTD company approach for her Side Hustle. LTD seems very much more tax efficient but what does it look like when your main income is mostly taxed PAYE? Also, what type of fees would an accountant charge for LTD company accounts.
Thanks again
Hello! Really good video thank you for the advice!
Not sure you'll see this but if anyone else knows i'd be grateful.
When you register your limited company and do your tax, will your company know who you're working for e.g. yourself or is it all kept private so they won't really know other than your tax code changing.
On a different note, I was walking past a bus stop today and noticed Mary is now the face of PensionBee ads? I had to stop and stare at it for few seconds to make sure it was Mary. Well done!!!
Yay! Yes, it's me 😊. Where did you see the ad?
@@TheHumblePenny yes I saw this ad on TV too and was cheering you on😀👏🏾👏🏾
My phone is full of THP screenshots. You're such a good teacher and this channel is gold! ✨
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The humble penny channel is extremely informative and resourceful, I wonder why someone will be hesitant to subscribe, I have learnt a lot from your platform even though I have been investing since 2004. Your back catalogue of videos on ETFs and REITs have helped me balance out my portfolio as the dividends trickles in passively. Thanks for financially educating us in all realms of archiving FIRE 🔥 you are such an inspiring couples, double thumbs up 👍🏾👍🏾
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Fantastic video, finally gives some clarity on how it works with 2 incomes and the untaxed allowance. Thank you!
Great! Do share with others
Thank you. I recently became a freelance designer after working for various agencies for 15 years. Considering the best route to go down - very informative
This is 💯 needed. Thanks so much!!
You're welcome. Please share with others 😊
Pure gold Ken. Thank you for this much needed information.
You're welcome, Angie 😊
Too good Ken & Mary. Ken, you're a natural teacher. Brilliant content 👌 👏. Keep on keeping on the great work Team Humble Penny. God bless.
Thanks a lot! 😊. Please share with others. God bless.
Súper helpful guys
I needed this video 2 weeks ago😃 but definitely still helpful. Thank you
Thanks for watching 😊
Notes taken. Such a great video. Thanks for this
👊🏾. Please share with others
Wow this is incredibly helpful information. Thank so much its clear this took a lot of effort to make!
Glad you appreciate the effort here. It was a tough one 😅
great video. Thanks for making!
Cheers, Tom.
Simply put Kemi has no money left 😂. Thank you so much for this video been looking for this for ages. Great information. Also putting me off hahaha.
Amazing!! I loved making this video. Do share with others.
Great video you guys explained it so easy thank you , subscribed 😊
Awesome! Thank you! 😊
Thank you. The video is very helpful
👍🏾
Good stuff, just wanted to point out the Class 4 threshold has also gone up this year to 9881 from 9568
Thank you, Ian 🙏🏾
I really loved the video, you really did explain it in such a detail!
It seems for me like such a big ocean, I have started earning some money from a side hustle, but for now I think being a sole trader would be a simpler option :)
Thank you :). Starting as a sole trader is a good move for sure.
Thanks the Humble penny. It was so informative. This is currently my dilemma.
Glad to hear that you found this useful 👍🏽
video on buy to let taxes pleaseeeee 😊
Noted.
Hey guys, great video. Question on Ltd company salary. You mention that if Chidi took a salary he would have to register for self assessment but if he used someone to do payroll for him and provide payslips etc…would that not just be another PAYE situation?
Thanks for the video - very enlightening. Question please - For Chidi, will he still not have to pay tax on the £8,840 salary, considering that his personal allowance would have been used up by his PAYE (ie from his job as a doctor)?
Would that not then lead to a situation where any company profit is better withdrawn entirely via dividend?
Thank you so much for this very helpful video. Please I have a question. My side hustle has made over £1000 income so far this year which means I’ll have to register for self-assessment, right? Will I have to pay tax now or wait until I have up to £12500 of income? Do I only pay tax if I make at £12,500 income every year?
Amazing video, thank you! It was very informative. Would you be able to cover Crypto trading as a side hustle and UK tax please?
We've done a detailed Crypto tax video already :). Please search our channel
Hi mate your video is top
I have a question please
I have already registered a company and the propose of company is to rent out houses
However I have not physically operated my business yet due to lack of understanding.
so my question is how can I list the house to business so i can start operate it legally and paying taxes.
And how can I pay taxes.
Please mate and sorry for my broken English.
Many thanks
Thank you so much for a clear and concise presentation. Can a sole trader upgrade (for want of a better word) to a limited company once the side hustle starts doing well?
You're most welcome 🙏🏾. Yes 😊
Hi Ken, thanks for all your insights, I have a quick question. If one starts as a one person Ltd. company and wants to bring in his/her spouse, is it better bringing the spouse in as an employee or a director, which is more tax effective especially if the person wants to maximize dividend taking.
You're welcome :). It's better to bring a spouse in as a director and shareholder. This offer best tax efficiency.
Currently, I am an employee and rent out a property. Rental income takes me to a higher rate tax bracket. I also own a limited company company. To reduce the tax, can I take the rent into my limited company account and then take that money out as a dividend?
I've entered my UTR and it asked if i'm best described as a Trust or a Partnership. I'm not sure i'm either but i have to chose one.....and then register that option. Any suggestions please?
Thank you so much for this video. I have considered so many times to get some help from maybe an accountant for my situation. I earn £52,000 from my day job. I tutor on the side and sell some digital products on my website as well as having a small consultant job for a publishing company. I only earn about £8-10,000 on all of these and I’m not sure what to do. I set up as a sole trader but it’s so sad to see 40% + NI of it all going 😅
Hi Veronica
You're welcome 😊. Yeah, because you're already a higher rate tax payer, you're tax at the top slice of tax being 40%. A Limited Company would make sense in your shoes as you can better manage business expenses etc and withdraw profits in more tax efficient ways e.g. via dividends or pensions, etc.
@@TheHumblePenny Thank you for the reply! Yes, I have wanted to do this but I have such limited knowledge that i fear i would have to use too much money on an accountant to help me.
@@TheHumblePenny Hi Ken, what if you’re say 1.5k below the 40% tax threshold and could potentially earn 3k per year from your side hustle? Would you still recommend starting as a Sole Trader?
I am looking at starting up an Etsy shop but am stuck with what path to follow, whether I should do a sole trader as starting out first or a Limited company, would love a little more information on what would be suited best. thank you so much, quick edit... so starting out I don't really have to register if my profits are below £1000, could I still get a business bank account or use a spare personal bank account first then if my business takes off I can then go as a sole trader self employed etc?
it would be great if you could make a video about traditional employment and tax... it's looking like there is nothing to be done
What exactly do you want an answer to?
Hi, Thanks for the video, so I recently started a side hustle and opened a limited company, but I have been spending my income on normal grocery n household stuff, I don't know if that will affect me when it's time to pay my tax
You shouldn't combine personal and business expenses. Those expenditures will be treated as income to you and taxed as such if they're of a personal nature.
Hello guys, hope all is well. In order to set up a business bank account do I already need to be registered on companies house as a limited company?
Yes. You need a business entity to open a business account
Ken/Mary, thanks for sharing your wisdom as always. I'm a bit torn. I'm keen to start my copywriting business and have a company name in mind. However I also have a full time job earning around 30k. As I don’t have any clients yet should I start as a Ltd, a Sole Trader or not register on Companies House?
I'm not sure how hard it is to incorporate a ST into a Ltd at a later date... wondering if you had any suggestions please?
Thank you in advance and keep up the great content!🙌
At that income level, if we were in your shoes, we'd start as a Sole Trader. It's not difficult to transfer from Sole Trader to Limited company. But there is admin to do...
@@TheHumblePenny thanks both! I'll look into it. Thank you for everything. Your wisdom is priceless.
Can you set up a limited company and be employed by an employer and have a side hustle and both “payments” go within that LTD?
You can if your employer is happy to pay you into that limited company.
Can you just pay dividends from a limited company instead of both salary & dividends, if you a currently in full time PAYE role outside the company?
Yes. As you're a shareholder of your business.
Does that £1000 before becoming a sole trader still count if it is a second job? I think i understood it as yes but i just want to confirm before i start a side hussle. (Im paranoid about getting this wrong)
Hi! I earn £33.5k per year salary on my main employment, I also earn £3.5k from a part time employment. Both are PAYE and tax and NI is sorted by the employers. However, my friend and I also have a little side hustle, buying and selling things. It turns over approx £100k per year, but only £36k of this is profit. We don't have a joint bank account, we just use the one account and give ourselves a wage monthly. Therefore, I personally make around £18k per year with my side hustle for my equal 50% cut. What would be the best route for myself / us as my friend wants to continue being self employed each, but does that not make the books difficult that way? Thanks in advance!
Hi Guys, similar to Veronica's situation (in the comments), I earn within the 40% tax bracket and have a side hustle earning between 500-700pm. I initially set up as a sole trader due to the fact it's lower revenue and that I could manage my accounts myself (and not pay accountancy fees).
I had a ltd company a few years back and was paying around £120pm and simply thought that this option would be a waste if I was only earning £500 per month (the lower end).
I wasn't aware of NI so I'll have to look into that but it does seem sole trader option isn't the best option for me. Considering the tax year is up soon, I'll look to set up a ltd company for 22/23 tax year. Do you recommend any accountancy firms to manage these smaller revenue accounts?
Thanks
Thanks for sharing. I hear you. About accountancy firms, you can search for an Accountant on the ICAEW website.
This is what i will have to look for as well. I´m not confidant enough to manage the accounting myself. But i fear i woudl spent too much on an accountant for it to be worth it.
Are there any tax deductible expenses for side hustles, such as broadband and energy costs?
We gave different examples in the video. Please watch the relevant time stamped sections that answer this question if your side hustle operates as a sole trader or limited company.
@@TheHumblePenny thank you
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can i have a job and a LTD company????
Absolutely. A lot of people do. I did.
@@TheHumblePenny is it better to start as sole trader or ltd company