£1,000 Side Hustle Tax on £25,000 Salary 2025-26
Trading allowance · Additional income tax · Net take-home
Marginal tax rate on side hustle: 20%
Your salary of £25,000 uses up the personal allowance. Taxable side hustle income is added on top and taxed at the basic rate of 20%. The first £1,000 of side hustle income is covered by the trading allowance and is tax-free.
Full tax breakdown — £25,000 salary + £1,000 side hustle
| Item | Salary only | With side hustle | Difference |
|---|---|---|---|
| Gross income | £25,000 | £26,000 | +£1,000 |
| Trading allowance | — | -£1,000 | -£1,000 |
| Income Tax | -£2,486 | -£2,486 | None |
| National Insurance | -£994 | same | — |
| Annual take-home | £21,520 | £21,520 | +£1,000 |
NI on PAYE income is unchanged. Class 4 NI (6%) on self-employment profit applies if taxable side hustle profit pushes above £12,570 combined — rare at these income levels.
How is tax calculated on a £1,000 side hustle?
The first £1,000 of side hustle income in any tax year is covered by the trading allowance, meaning it is completely tax-free and does not even need to be declared to HMRC. Your £1,000 side hustle income is within the trading allowance — no tax to pay and no need to register for Self Assessment.
You cannot collect side hustle tax through PAYE — you must register for Self Assessment, complete a tax return, and pay the additional tax by 31 January following the end of the tax year. You must register by 5 October after the tax year ends (i.e., 5 October 2026 for the 2025-26 tax year).
Frequently asked questions
Do I need to declare £1,000 side hustle income?
No — your side hustle income of £1,000 is within the £1,000 trading allowance and does not need to be declared to HMRC. You pay no additional tax on this amount.
What is the £1,000 trading allowance?
The trading allowance is a £1,000 per year tax-free threshold for self-employment and casual trading income (including selling on eBay, Etsy, Vinted, renting on Airbnb, and freelance work). You only pay tax on the amount above £1,000. On £1,000 of side hustle income, the taxable amount is £0.
How do I pay tax on side hustle income?
Side hustle income is not collected through PAYE. You must register for Self Assessment by 5 October after the tax year ends, then file your tax return by 31 January. HMRC will calculate the tax owed — in your case approximately £0 on top of your normal PAYE tax — and you pay by 31 January. If you are new to self assessment, you can register at gov.uk/log-in-file-self-assessment-tax-return.
Can I claim expenses on my side hustle?
If you claim the £1,000 trading allowance, you cannot also claim expenses on the same income — it is one or the other. If your actual expenses exceed £1,000, it may be more tax-efficient to claim real expenses instead of the trading allowance. Expenses must be "wholly and exclusively" incurred for the business.