How do I calculate adjusted net income (ANI) in the UK?

Full answer

Adjusted net income (ANI) is a specific figure calculated by HMRC to determine entitlement to several income-related thresholds. It is **not** the same as taxable income. **How to calculate ANI:** 1. Start with your **total income** (employment, self-employment, rental, dividends, savings interest, etc.) 2. Deduct **gross pension contributions** paid personally (not via salary sacrifice) — e.g. SIPP contributions where relief at source applies are added back up to the grossed-up amount 3. Deduct **Gift Aid donations** grossed up at basic rate (so a £800 donation = £1,000 grossed-up deduction) 4. Deduct **trading losses** and **qualifying loan interest** 5. The result = **Adjusted Net Income** **Why ANI matters — key thresholds:** | Threshold | ANI level | Effect | |---|---|---| | Personal Allowance taper | £100,000–£125,140 | PA reduces by £1 for every £2 ANI above £100k | | High Income Child Benefit Charge | £60,000+ | 1% HICBC per £200 above £60k; 100% clawback at £80k | | Tax-Free Childcare | Under £100,000 | Lose eligibility if ANI reaches £100k | | Marriage Allowance | Under £50,270 (recipient) | Lower earner must be below basic rate threshold | | Personal Savings Allowance | £50,270 / £125,140 | £1,000 / £500 / £0 depending on rate band | **Salary sacrifice vs SIPP — ANI impact:** - **Salary sacrifice** reduces your contractual pay, so ANI drops automatically (the pension contribution never enters your income). - **Personal SIPP contributions** (relief at source) do NOT reduce ANI automatically — you must claim the excess relief via Self Assessment, which then adjusts ANI. - **Both** ultimately reduce ANI, but via different mechanisms. **Practical example:** Earning £105,000 gross. A £5,000 SIPP contribution (grossed-up to £6,250 with 20% relief) reduces ANI to £98,750 — keeping the full £12,570 Personal Allowance and avoiding the 60% effective tax trap.

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