Some employers are struggling to retain talent in-house. Employees have adapted to remote working, favour the flexibility and many are deciding to pave their own future by starting a business.
A side hustle means you are starting a business while in employment. That brings with it obligations. Obligations for tax, and some foundations that may be required before you begin trading.
Starting with securing your existing income…
Keep your current employment secure
When you’re an employee, even if it is not stated in your employment contract, you have an implied duty of fidelity to your current employer. It means that you should act honestly, with integrity, and not be secretly profiting from your position.
Whatever you do should always be in the best interest of your employer. One of the main aspects to consider is if your side hustle will involve you competing with your employer. Also, in the interest of employers, you shouldn’t poach their staff. They will have paid the recruitment costs to build teams so if your side hustle involves bringing co-workers aboard your new operation, your boss is likely to have something to say about that.
Even if you feel your side hustle will in no way create a conflict of interest with your employer, it is still advisable to make them aware of your situation because they have legal obligations for your employment.
Health and safety, possibly the Working Time Directive (limiting your hours to 48 hours weekly unless you opt-out), and if your job involves driving, there will be Driving Hours Regulations too.
When making disclosures to employers, provide assurances that your work for them will not be impacted. If anything, it will improve because you’ll gain hands-on experience in multiple business disciplines that could eventually benefit them. The one thing you need to be certain you have is safeguards against fatigue. Do not let a side hustle consume you.
And once you get stuck into your start-up, do not work on your business on your employer’s time. Until your new venture is profitable enough to sustain a profitable future, existing income will be your lifeline.
Getting the Legalities Right
Business licenses are easily overlooked because they are not necessarily required for starting a business, but the activities you do while conducting business activities may require licensing.
As an example, a qualified hairdresser can voluntarily register with the Hairdressing Council to become a State-Registered Hairdresser. It is not compulsory. What may be compulsory is registering with your local council. Some require registration, others don’t. It differs by borough.
Even if you do, you need a separate license to play background music in any business premises. If you want to put an advertisement sign on the pavement outside of premises, or a signpost to help people find your business location, you need a Pavement or street display licence.
In nearly all cases of a business start-up, you will be required to register with the ICO to be able to process personal data.
To find out what you need to do, refer to https://www.gov.uk/licence-finder. The tool lets you select the activities that you would like to do and then tells you what licence or registration is required.
Other Aspects not to Overlook
Software: There will be aspects of a side hustle that requires the use of software. Check the agreements of these and that you are using the official version. Not a key bought on eBay as that could be from anywhere, may not be supported by the vendor, and possibly risk compromising data security. If you start on your own, a single user licence will be enough. Once your business grows, consider multi-user licensing, or site licenses. Using a single user license on multiple systems may still fall in the piracy category.
Insurances: If you plan to hire anyone, even if it’s on a casual basis, or if you have contractors working on site, employer’s liability insurance will be required. If your side hustle is done from your home, check your home insurance policy covers you for business use.
Health and Safety: There is no getting around this. The guides, handbooks, and checklists are available at https://www.hse.gov.uk. This is not just for employers. It impacts everyone on your business premises. Customers, client meetings, contractors, and the public.
Setting up with HMRC
Most side hustles fall into the sole trader category. You can also structure your business as a Partnership or a Limited Company.
Setting up as a sole trader is the easiest method, but it is riskier because any business debts accrued, you will be personally liable for. If your business takes a financial hit, you take it personally. Your home and savings are linked. Set up as a Limited Company, your personal assets are separated from your business assets. It is a huge advantage, but it comes at the cost of extra admin work. There are lot more obligations involved in running a Limited Company than there is for a sole trader.
In terms of the tax status, how you set up your side hustle will have a bearing on what you pay. Sole traders pay Income Tax, Limited Companies pay Corporation Tax.
Before diving feet first, neck-deep into a side hustle, run through the above considerations to make sure you’re getting yourself off to the best possible start with minimal risk of backlash from either your current boss, any vendors you use, or HMRC further down the line.