Expert shares: side hustles not affected by the tax crackdown

As the government tightens its grip on tax evasion and unreported income, many entrepreneurs and part-time hustlers find themselves navigating a complex and sometimes daunting fiscal maze.

Selling Personal Items At A Loss

The £1,000 trading allowance in the UK serves as a significant aspect for individuals with side hustles. Introduced to simplify tax for small-scale traders and encourage entrepreneurship, this allowance allows individuals to earn up to £1,000 per year from trading activities without the need to pay tax on this income.

This encompasses income from self-employment or casual services such as odd jobs, freelance work, or selling homemade crafts. If your total income from such activities is less than £1,000 in a tax year, there's no need to declare this to HMRC or pay tax on it, effectively making this portion of income tax-free.

Matched Betting

Matched betting is a technique used to profit from free bets and incentives offered by bookmakers and is often considered risk-free because it's based on mathematical equations rather than chance.

Initially, a bet is placed with a bookmaker using their free bet offer, known as a 'qualifying bet'. This may require placing a bet of a certain value on a specific event to qualify for the free bet.

Simultaneously, a 'lay' bet is placed at a betting exchange, betting on the opposite outcome of the first bet. For instance, if the first bet is for Team A to win, the lay bet would be that Team A does not win, which could mean they either lose or draw, depending on the sport.

This strategy ensures that all possible outcomes of the event are covered, so regardless of what happens, the loss in one bet is compensated for by the winnings in the other.

This eliminates the risk of losing.

Once the free bet is received, the process is repeated. Since the free bet doesn't involve one's own money, the profit from these bets becomes the individual's profit.

Matched betting requires careful calculation and attention to detail to avoid mistakes that can lead to losses. It also necessitates having accounts with multiple betting websites and possibly a betting exchange. Bookmakers may also limit or close accounts if they identify users employing matched betting strategies.

Cashback and Rewards

In the UK, the tax treatment of cashback and rewards, such as those earned from credit card points or cashback sites, is generally not considered as taxable income for individuals not engaged in trading or property business.

This is based on the principle that customers who choose to use certain services or buy certain goods, thereby earning cashback or rewards, are not providing a service that would make this income taxable. Essentially, if you receive cashback or rewards in a personal capacity and not as a part of your trade or business, it's not typically subject to tax.

Renting Out Your Home

Renting out your driveway or rooms in your house can serve as an effective way to earn extra income. When it comes to renting out your driveway, the potential for profit largely depends on its location. Driveways in high-demand areas, such as near city centers, airports, or event venues, are particularly lucrative.

You can list your driveway on online platforms like JustPark or Parklet, which manage bookings and payments.

The key is to research local parking rates to set competitive prices and to be clear about the availability of your driveway. It's also crucial to understand local regulations and tax implications, and to make sure your home insurance covers the commercial use of your driveway.

In the case of renting out rooms in your house, platforms like Airbnb can simplify the process of listing your space, managing bookings, and receiving payments. The attractiveness of your space is important, so providing a well-furnished, clean, and comfortable room is essential.

Setting clear house rules, considering local competition for pricing, ensuring compliance with safety standards and local regulations, and deciding the level of interaction with guests are all important factors. The income you earn from renting out rooms is typically taxable, but it's important to note that in many places, a portion of this income can be earned tax-free under specific thresholds.

For example, in the UK, the Rent a Room Scheme allows you to earn up to a certain amount per year tax-free from letting out furnished accommodation in your home.

Being aware of your responsibilities, legal requirements, and the potential for tax-free earnings within certain limits can help make this venture both profitable and manageable.