If you earned money from a side hustle in 2023, here’s what you need to know

When the pandemic hit, Laurie Hartley started making customized mugs and stemless wine glasses to sell through Facebook and Instagram. Ms. Hartley, who lives in Scarborough, Ont., used a Cricut machine to create vinyl designs of topical slogans such as, “Namastay at home” and “Missing my peeps.”

“It was more of a hobby,” Ms. Hartley said of the time she started her side business. But in 2022, she bought an advanced printer that allowed her to create more durable, customized designs.

At the same time, said Ms. Hartley, who works full-time as a service co-ordinator for an HVAC company, her monthly bills were rising. “Even though I make an average salary, I was literally living paycheque to paycheque.”

Her business, This & That Customized Gifts, is now a considerable source of additional income: She expects to earn $6,000 through it in 2023. She reinvests half her profits while the rest pays her gas bills and funds entertainment – things such as travel and taking her parents out to dinner.

Scott Schieman, a sociology professor at the University of Toronto, said people are seeking out side gigs to earn extra income or to supplement an insufficient income.

Survey findings from internet domain registry GoDaddy, released in May, 2023, showed that people between 25 and 44 were the age group most likely to pick up a side gig. “You see younger people struggling a bit more financially to get established and get anchored,” Prof. Schieman said.

While Ms. Hartley, at 53 years old, is older than the average side-hustler, her personalized mugs represent the most common category of side businesses, according to GoDaddy’s survey. Twenty-six per cent of respondents sell self-made goods, including art, crafts, toys, food and health and beauty products, whereas 24 per cent sell professional services such as marketing, accounting, tutoring and administrative help.

For many people in Canada, 2023 was a difficult year financially, as high inflation, rising borrowing costs and a slowing economy hurt household finances across the country.

According to a March, 2023, survey from H&R Block, 28 per cent of Canadians took on gig work to boost their incomes, up from 13 per cent in 2022. The company conducted a similar survey in 2021, which found that just 7 per cent of respondents said they worked in the gig economy in 2020.

Looking ahead to 2024, Paul Glavin, an associate professor at McMaster University’s department of sociology, predicts more people may take on side gigs out of financial necessity, with Canada potentially heading into a mild to moderate recession.

He doesn’t expect the number of people holding multiple jobs to change, however.

“When economic growth slows down, opportunities for side hustles also decrease, reflecting the overall economic trend,” Prof. Glavin said.

Vic Arora, managing director at Blackspark Personal Tax Accountants in Toronto, has noticed an uptick in clients reporting income from a small business.

“We’re seeing people come with questions specifically about the ramifications of them now earning incremental income as a contractor or self-employed person, in addition to a full-time job that they already have,” he said.

Mr. Arora reminds side-giggers to set aside funds from their business earnings for income tax. “You’re entirely responsible for that.”

Depending on how high their regular salary is, earning additional income can also push some side-hustlers into a higher tax bracket, reducing the profits they’ll reap.

Mr. Arora suggests small-business owners, including those with side gigs, keep good records of business-related expenses (such as transportation and a portion of housing costs and utilities) in order to reduce their taxable income.

“The Income Tax Act is quite broad in its definition of what’s an allowable expense,” Mr. Arora said. “The act says that you can deduct any expense incurred in the endeavour of earning business income.”

Charging GST is another common issue clients ask Mr. Arora about. “In Canada, you are only required to collect and remit GST once your business income is in excess of $30,000 in a tax year,” he said. He advises clients who collect GST for their businesses to open a separate bank account to store these funds.

Natasha Knox, a certified financial planner based in Vancouver, encourages people to view side gigs as a short-term way to boost income, with a timeline and end goal in mind. “Maybe you’ve got a credit card that got out of control, or a car loan that you really regret. That’s where a side hustle can be really handy.”

If you need to make up for shortfalls in your monthly expenses, Ms. Knox recommends evaluating your overall budget before diving into a new business venture. “Is more money really the solution, or could you spend less? For someone who has a lot of demands on their time already, there might be a place to trim the fat.”

She also reminds side-giggers not to get distracted from their nine-to-five. “Make sure that your main, steady gig that pays the bills isn’t going to be adversely impacted,” she said. “Don’t put yourself in a position where you could get fired because your quality of work suffers.”

You should also determine whether your side gig can adequately make up for your monthly shortfalls. If you’ve got debt piling up, more drastic measures may be necessary.

“It may be time to make some big, hard decisions, and none of them look good,” Ms. Knox said. “It may be time to reach out to a licensed insolvency trustee.”

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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