What is adjusted net income and how do I work it out?
Adjusted net income is your total taxable income before any Personal Allowances, less certain tax reliefs. It decides whether you lose Personal Allowance above £100,000 and whether the High Income Child Benefit Charge applies. Pension contributions and Gift Aid donations can reduce it, which can bring the figure down.
Figures checked against gov.uk on . General information, not tax advice.
The steps gov.uk gives
Start by adding up your taxable income. Deduct reliefs such as pension contributions paid gross, without tax relief at source, and trading losses, to reach net income.
- Gift Aid: deduct the grossed-up amount, meaning the amount you paid plus the basic rate of tax. For every £1 donated, deduct £1.25.
- Pension contributions where your provider already gave basic-rate relief: deduct the grossed-up amount, so £1.25 for every £1 you contributed.
- Trade union and police payments for superannuation, life insurance or funeral benefits with tax relief of up to £100: add back any amount deducted in the first step.
Why it matters
Savings interest and dividends count as taxable income, so a person with a modest salary and large dividends can be nearer a threshold than they expect. Because the figure drives two separate thresholds, £100,000 for the Personal Allowance and £60,000 for the child benefit charge, a single pension payment can help with both when you are close to the line.