Earning Over £100k with a Side Hustle? Here's What Changes

A £100,000 income sounds like a milestone worth celebrating. But in the UK tax system, crossing that threshold quietly triggers a set of changes that many people don't see coming — including an effective tax rate of 60%, the loss of free childcare, and more. If your side hustle is pushing you towards that figure, here's exactly what you need to know.

The personal allowance taper — the 60% tax trap

Everyone in the UK gets a tax-free personal allowance — for 2026/27 that's £12,570. But once your total income exceeds £100,000, HMRC starts taking it away.

For every £2 you earn above £100,000, you lose £1 of your personal allowance. By the time your income reaches £125,140, your personal allowance has been reduced to zero.

This creates what's commonly called the 60% tax trap. Here's why:

For side hustlers, this is particularly important. Your salary might sit comfortably at £95,000, and your side hustle adds £10,000 on top. That extra income pushes you to £105,000 — right into the middle of the trap — and a significant chunk of it gets taxed at 60%.

Loss of free childcare entitlements

If you have children under five, the £100,000 threshold also affects your childcare entitlements. These are based on your adjusted net income — and if either parent exceeds £100,000, you lose access to the working families childcare hours.

What you lose if either parent earns over £100,000:

• 30 hours free childcare for 3 and 4 year olds — the additional 15 hours on top of the universal entitlement, worth around £5,000–£6,500 per year depending on your area
• 15 hours free childcare for children aged 9 months to 2 years — extended in 2024 for working families
• Tax-Free Childcare — the government's 20% top-up on childcare costs (worth up to £2,000 per child per year)

The universal 15 hours for 3 and 4 year olds is not affected — that's available to all families regardless of income.

High Income Child Benefit Charge

Child benefit is affected at a lower threshold, but it's worth understanding alongside the £100k changes. If you or your partner receive child benefit and either of you earns over £60,000, HMRC begins clawing it back through the High Income Child Benefit Charge (HICBC).

• Between £60,000 and £80,000: child benefit is gradually reduced
• Above £80,000: child benefit is fully clawed back

A side hustle pushing your income from £55,000 to £65,000 would bring you into this charge — something many people don't realise until their Self Assessment bill arrives.

What counts as "total income" for these thresholds?

All of these thresholds — the personal allowance taper, the childcare entitlements, and the child benefit charge — are based on your adjusted net income. This includes:

• Your employment salary
• Self-employment profits from your side hustle
• Rental income
• Dividend income
• Interest and savings income

It's not just your salary — it's everything. If your salary is £90,000 and your side hustle makes £15,000 profit, your adjusted net income is £105,000 and all of the above applies.

What can you do about it?

The most effective way to reduce your adjusted net income below £100,000 — and escape the 60% trap — is to increase your pension contributions.

• Pension contributions — both personal contributions and salary sacrifice reduce your adjusted net income pound for pound. Contributing an extra £5,000 to your pension when earning £105,000 brings you back to £100,000, restoring your full personal allowance and childcare entitlements. The tax relief makes this extremely efficient.
• Gift Aid donations — charitable donations made through Gift Aid also reduce your adjusted net income. If you already donate to charity, make sure you're claiming Gift Aid.
• Salary sacrifice — if your employer offers it, sacrificing salary for benefits like a company car, cycle to work scheme, or additional pension contributions all reduce your adjusted net income.

Should you turn down side hustle income above £100k?

Not necessarily — but you do need to factor in the real effective rate when deciding whether additional work is worth it. An extra £5,000 from your side hustle might sound appealing, but if it triggers the 60% tax trap and costs you your childcare entitlement, the actual financial gain could be very small or even negative.

Run the numbers carefully before taking on extra work that pushes you above the threshold. Sometimes the smartest financial move is to channel that income into a pension instead.