Whether it’s finally launching the start-up business you’ve always dreamed about, moonlighting in a new role or working as a reseller, second jobs are more popular than ever.
The cost-of-living crisis drove 16% of workers to take on an additional job in late 2022 to help with rising costs, according to Royal London. By 2024, that figure had risen to 19%.
Stuart Wilkie, head of commercial finance at Anglo Scottish, said interest in taking on a side job “peaks like clockwork every January.”
He added: “Cash is usually in short supply after Christmas, particularly as January stretches on, so it’s no surprise that people begin searching for the best way to make a bit of money on the side.
“You might find that the money you’re bringing in from your second job – be it a self-employed venture, a hobby turned profitable or something more regimented – begins to contribute a significant part of your income.
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“When that’s the case, you might be tempted to make the leap to take your side hustle full-time. Here’s how to know when you’re ready – and how best to make that change.”
Wilkie has set out five steps to help make your side hustle your main hustle.
Step 1: Plan for contingency
Most people get tempted to make the leap and switch careers after their best-ever months working on their side hustle. After all, these positive signs are what encourage us to make the change in the first place – but you’ve got to take a breath and think about the big picture.
Even the best-laid plans can go awry through no fault of your own, so be sure to have an emergency fund of at least 3-6 months of living expenses saved before making the switch. Similarly, if you’ve leveraged any high-interest debt in your side job, paying it down – or preferably off – will give you a little more of a safety net before switching.
Step 2: Evaluate income and growth potential
When you’re looking back at your financial performance in previous months working on your side hustle, consistency is key. Your side hustle should be generating 80-100% and upwards of your current job’s take-home pay for at least four months – this demonstrates you can reliably live off of the income.
Considering future fluctuations in income will be necessary to make the right choices going forward, so if your side business has a seasonal element, ask yourself whether there have been months of higher or lower demand and plan accordingly to maximise your growth.
Step 3: Test the waters
If you can, try scaling up your side hustle as much as you can while still working your main job. Balancing the two might be a challenge, but you’ll be able to get a little more insight into how your customer base will respond to your side hustle scaling up.
It may even be possible to begin working part-time hours at your current job to make the switch easier.
Making a transition plan could help make the switch to your side hustle simpler. Start by setting monthly or even weekly revenue targets that will help you know when you’re ready to take your side hustle full-time.
Step 4: Be aware of the tax implications
Before making the switch, you’ll need to know what it means for you from a taxation perspective. This is particularly relevant if your side hustle is your own start-up. Be aware of the VAT threshold (£85,000 annual turnover) and know that you’ll have to register if your business meets this limit.
Similarly, if you become self-employed or a limited company owner, you’ll have to manage your own taxes. Take this into account when you’re planning your finances going forward – you can usually expect 20-30% of your income to be used for tax purposes.
Step 5: Protect yourself financially
If your business interacts with customers (either physically or digitally), investing in business insurance is usually the right course of action to protect yourself and your business against liability, damages or disruptions.
However, this isn’t the only type of protection you need to think about – when you’re leaving a more established employer, you should think about the financial and additional benefits you’d be sacrificing and take the cost of these into account.
For instance, are you receiving additional healthcare support, such as dental plans or matched pension contributions?
When you’re budgeting going forward, maintaining these from your own pocket can often be overlooked. And, in the long term, visibility over every expense will be vital to keep your side-hustle-turned-business growing safely and securely.
There’s no one-size-fits-all approach to turning your side hustle into your main hustle. Ultimately, there are many factors that come into play, especially the state of your personal finances. In most situations, it’s worth speaking to a professional to get an accurate picture of whether the time is right for you to make the switch.
