A side hustle is effectively a business and you are the business owner. As such, whatever you are planning to do needs the same considerations as if you were actually leaving your job to work for yourself full time. Frankly, you never know, in the next few months you might be a lot more reliant on the income from your micro business.
As tempting as it is to just pocket the extra earnings, there is a very good chance that you will be found out by HMRC at some point and asked to pay the tax due plus interest. Needless to say, you will be on their radar from then on.
Therefore before starting any side hustle, register for tax. Setting up as a sole trader is very easy and suitable for side hustles. A limited company is reasonably easy too but there are subsequent obligations which you may not want to get into when you are starting up. Also closing a limited company is not without cost and you will usually need an accountant to perform this task for you.
From day one you will need to keep your records in order. Always act as if you are about to face an HMRC enquiry. That means keeping tidy records and accounting for anything you spend or earn. As a sole trader, you can use your personal bank account but that is not recommended. If you can get another one easily, do that to keep your business finances separate from personal affairs.
If you are not good at keeping financial records or preparing tax returns, outsource. You can either go for a local accountant who specialises in small businesses or you can subscribe to an accounting package online. The latter is usually quite cost-effective but it still relies on you keeping up with the records. Whereas a local accountant is likely to keep files for you as long as you provide them with all the information and receipts.
It is very unlikely in today’s day and age that a customer will engage with you unless they can get some sense of who you are and what you can offer them.
Whatever business you set up, your customers or clients expect to find you online. This could be as simple as having a social media business page that carries your contact details, enough description about your expertise and how you can help others.
If you are thinking about setting up a website, you will also need to consider what is called “search engine optimisation” (SEO). In simple terms that means building a website which Google and other search engines find easy to read and consider relevant enough to display it to your audience. This is particularly important if you intend to use your website as the main point of generating business.
SEO is a specialist area and if the website is an important part of your business, it pays off to outsource this job. Don’t know where to start? Simply type in to google search ‘SEO agency’ + your location, e.g. SEO agency London. There are plenty of agencies around the UK and while the physical location is less important these days, having a marketing consultant close to you offers the opportunity to meet them face to face.
Even when it’s something as simple as dog walking, you need to sit down and think about how much it will initially cost you to set up, how much you need to charge for your service and how it compares with the rest of the market, how you will find your first few clients, how you will manage client contracts and communication, and consider any possible risks for which you might become liable.
If you lack experience in business planning, look around your work or social circles. Friends and family are always happy to help and while a single person might not know it all, everyone has an area of expertise. Lean on them for help.
When you start trading, no matter how small your income, you face possible legal exposures – from your clients, suppliers, regulators and the public. It is essential that you have a backup plan from day one.
Business relationships can sour, sometimes with little warning, and you want to have someone to turn to when you receive that uncomfortable email demanding financial compensation.
Many small business owners think they don’t need business liability insurance because they can’t foresee a possible problem. However, there are plenty of case studies in almost every profession where this strategy failed and without insurance, the business owner ended up facing substantial legal costs.