With Little Money: 6 Ways to Cut Side Hustle Costs

Intro

Before you buy ads, test $100, not 1,000 upfront. Number one is smarter spending, from suppliers to energy plans; easiest first.

1. List every cost your side hustle has

Number six: list every cost your side hustle has. Start with what you paid before your business earned any income. Then running costs you pay regularly, like rent, wages and stock, one guide says. Sort them into two kinds, fixed and variable, several guides agree.

Fixed costs aren't expected to change, like insurance, rent, and electricity and internet. Variable costs rise or fall with how much your business produces. Then the small ones: phone and internet bills, postage, printer ink, and parking or bus fares. Watch what your bank charges to process card payments, one portal says.

Underused subscriptions and memberships can add up to significant waste, another portal says. One guide suggests adding twenty to 30% for costs you haven't thought of. One tax guide lists a year's costs for a van used in a business. Licence and registration, $100; gas and oil, 2,400.

Insurance, 1,900; interest, 800; maintenance and repairs, 200. By our count, that's 5,400, the page's own total, and gas and oil are the biggest part. If practical guides like this help you, subscribe. Every step and rule in this video comes straight from the official guide pages linked below.

2. Keep proof of every expense

Number five: keep proof of every expense. Keep records of all your sales and income, and all business expenses, one tax guide says. Its types of proof include receipts, bank statements, chequebook stubs and sales invoices. Another guide adds sales slips, paid bills and deposit slips.

Your documents should show who you paid, how much, proof of payment, the date, and what you bought, it says. These papers support the entries in your books and on your tax return, it adds. Keep them in order and in a safe place, organized by year and by type of expense. Always get a receipt when you buy something for your business, a third tax guide says.

If a seller gives no receipt, write the name, address, amount, date and details in your expense journal, it says. An expense can happen without an invoice, another tax guide says, but you do need a record of it. Images of paper records work too, if they're true and clear copies that meet its five record-keeping rules. Typing the details into your software isn't enough: you still keep a copy of the actual record.

One more guide says an image must give the same information as the paper, with no key detail hidden. And one tax agency lets you store digital copies of your receipts online. How long you keep them differs: one guide says at least five years after that year's filing deadline. Its example: a return sent online by the end of January twenty twenty-four.

Those records stay until at least the end of January twenty twenty-nine. By our count, twenty twenty-four plus five is twenty twenty-nine. Others say six years, or at least five, so check the rule where you live.

3. Split business from personal use

Number four: split business from personal use. If you use something for both business and personal reasons, you can only claim the business costs, one tax guide says. Three more tax guides say the same for a mix of business and private use. You'll need a reasonable method of dividing your costs, the first guide says.

For example, the rooms you use for business, or the time you spend working from home. Another uses the area of your workspace divided by the total area of your home. A workshop on 10% of the floor area, used only for business all year, claims 10%, one example says. Rooms used for both?

One guide takes the business hours in the day and divides them by twenty-four. For a vehicle, keep a record of the total kilometres you drive, and the ones you drive to earn income. That van again: 27,000 business kilometres out of 30,000. Applied to the 5,400 total, the page's business part is 4,860.

By our count, that's 90% for business, and the other 540 stays personal. For a vehicle, another guide gives three ways: a logbook, 25% of the running costs, or the actual costs. Use a laptop half the time for business, and you can only claim half of a repair, one example says. An internet plan for both uses works the same way, if your method gives a fair and reasonable result.

And keep records to show how you split each cost, one guide adds. One tax guide even skips the split for home costs, with a flat monthly rate by hours worked from home. Ten pounds a month for twenty-five to fifty hours, eighteen for fifty-one to 100, and twenty-six above that. It leaves out phone and internet, which you split by their actual costs.

Rules like these differ where you live. Our earlier seven-step guide to starting a business is linked on screen. Halfway there: your costs listed, proof kept, and business split from personal.

4. Know which costs may count against tax where you live

Number three: know which costs may count against tax where you live. Businesses get taxed on their income minus any business expenses and other deductions, one tax guide says. Several tax guides agree that a cost has to be related to your business. You must be able to show why you need it to earn the income, one says.

Another sets three golden rules. The cost was for your business and not private, you claim only the business part, and you have records to prove it. A third says a cost must be ordinary and necessary: common in your field, and helpful and appropriate for your business. It doesn't have to be indispensable to count as necessary, it adds.

Another lets you deduct any reasonable current expense you incur to earn income, as a rule. What doesn't count: money you take out of the business for yourself, two guides agree. Costs that are personal and private aren't allowable either, because they don't relate to your business. One list of costs you can't deduct includes traffic fines and clothes for your family.

Entertaining clients usually can't be claimed either, another guide says. Big purchases like machinery are capital, two guides say, and aren't claimed as everyday business expenses. In one guide's example, a turnover of 40,000 pounds has 10,000 in allowable expenses. So the tax is only on the remaining 30,000, known as your taxable profit.

By our count, the expenses are a quarter of the 40,000. Another's illustration has 15,000 in expenses, 10,000 disallowed, so 5,000 allowed. You don't send proof with your return, one guide says, but you keep it in case you're asked. Tax rules differ a lot where you live, so check your own.

So far: costs listed, proof kept, use split, and the tax rules checked.

5. Review your costs every month

Number two: review your costs every month. Schedule time each month to check your spending and compare it to your budget, one portal says. Comparing your actual costs with your budget shows where you're over or under, it adds. It writes the budget once a year, and suggests a mid-year review.

And it updates the forecast more often, monthly or quarterly. By our count, that's twelve monthly or four quarterly updates, plus one mid-year review. Review regularly to spot any trends or problems early, that portal adds. Busy owners let cost reviews slip, another portal says, so block out time for them.

Benchmarking tracks your costs over time and against similar businesses, it says. Give each expense its own line, one guide says, to see changes over time and get clues to cut costs. At the end of each month, one more guide compares the actual results with the budget. It notes why each gap happened, and labels it a timing or a permanent variance.

Timing means it's still expected later; permanent means it's not likely to happen at all. Spending more in some areas? Drill down, investigate why, and act to reduce those costs, one public business bank says. It also works out what percentage of sales your past variable costs were, as a benchmark.

Selling a service? Compare your actual work with your estimate, and use it for future estimates.

6. Cut what you don't need, and spend smarter

Number one: cut what you don't need, and spend smarter. You can improve your profit margins by carefully managing costs, one portal says. Start with subscriptions: cancel unused or low-value ones, or find free options, another says. Review your suppliers regularly, to check you're getting the best pricing, it adds.

And shop around for the best deals, from insurance to everyday supplies. Spending too much? Spend only on what's essential, and save on the essentials, like switching suppliers, one guide says. Get two or three quotes regularly, one public business bank says.

Try to negotiate better deals with your suppliers, another guide says, and sell what you no longer use. Leasing, or buying second hand, is another option one portal gives. Compare energy plans too, and check the best tariff before agreeing a contract. Nearly half of business electricity is used outside working hours, one energy guide says.

Office equipment uses energy even when it's not in use, another adds. To see what changes, one agency takes three or four meter readings at the same time each week as a baseline. If you heat or cool your home office, one agency suggests checking the filter every month. And changing it at least every three months.

Cheap doesn't always mean value for money, one portal says. Don't cut costs at the expense of the quality you deliver, another adds. Before a cut, one portal says, understand what it does to sales and service, so it isn't a false economy. Bulk buying can tie up your cash or add storage costs, that portal adds.

For marketing, test a small amount first, one guide says. Spend $100 and see your results, instead of 1,000 upfront. By our count, that keeps $900 unspent until you see results. One portal quotes an old lesson: money saved is money earned.

To recap: list your costs, keep proof, split business from personal, know the tax rules, review monthly, and spend smarter. Number six was the easiest step, and number one is spending smarter. A small first step: list this month's costs, and pick one subscription to check. Each guide's numbers are its own, and rules differ where you live.

Which cost will you check first? Tell us in the comments. Subscribe to see the next official guides we check. Your next step is in the video on screen now: seven steps for your side hustle cash flow.

Information only; results vary. This is Extra Income Explained.