Adjusted net income
Adjusted net income is your total taxable income less certain reliefs, such as grossed-up pension contributions and Gift Aid; HMRC uses it for several tests.
Adjusted net income is the income figure HMRC uses to decide whether you lose some of your Personal Allowance (above £100,000) and whether you pay the High Income Child Benefit Charge (above £60,000). HMRC describes it as “total taxable income before any Personal Allowances and less certain tax reliefs”.
According to GOV.UK, you work it out in four steps:
- Add up taxable income (pay, profits, interest, dividends, rent) and take off reliefs such as trading losses and pension contributions paid gross.
- Take off Gift Aid donations grossed up: £1.25 for every £1 you gave.
- Take off pension contributions made with relief at source, grossed up the same way: £1.25 for every £1 paid.
- Add back any tax relief on trade union or police organisation payments.
Example: you earn £65,000 and pay £4,000 into a personal pension from your net pay. Grossed up, that is £5,000, so your adjusted net income is £60,000. That keeps you at the £60,000 threshold for the Child Benefit charge.
Pension contributions through salary sacrifice or a net pay arrangement already reduce taxable pay. Test the effect in the UK take-home pay calculator.
Tools that use it
Guides that explain it
- The 60% tax trap: how the £100,000 Personal Allowance taper works
- High Income Child Benefit Charge: how it is worked out and cut
- Is salary sacrifice worth it? How much you actually save
- Pay rise take home: how much of a UK pay rise will you actually keep?
- Pension tax relief: how it works and how to claim the higher rate