What is adjusted net income and why does it matter?

Full answer

**Adjusted Net Income (ANI)** is a specific HMRC calculation used to determine eligibility and rates for a number of UK tax thresholds. Unlike gross income, ANI can be reduced through pension contributions and charitable giving — creating planning opportunities. **How to calculate ANI:** ANI = Total net income − relievable pension contributions − Gift Aid grossed-up donations − trading losses − other deductions **Step-by-step:** 1. Start with **total net income** (sum of all taxable income sources: employment, self-employment, rental, savings interest, dividends, pension income) 2. Deduct **gross pension contributions** paid to a SIPP or personal pension (not salary sacrifice — that reduces gross pay before it reaches ANI) 3. Deduct the **grossed-up Gift Aid** donations (cash donation ÷ 80 × 100 = grossed-up amount) 4. Deduct **trading losses** and certain other statutory reliefs **Key thresholds based on ANI:** | Threshold | ANI level | Effect | |---|---|---| | Child Benefit HICBC | **£60,000** | Charge begins, rising to 100% at £80,000 | | Personal Allowance taper | **£100,000** | PA reduces by £1 per £2 above — gone at £125,140 | | Personal Savings Allowance | **~£50,270** | Basic-rate PSA £1,000; higher-rate £500 | | Marriage Allowance eligibility | **£50,270** | Recipient must be basic-rate taxpayer (ANI < higher-rate threshold) | **Why it matters for planning:** Making a £10,000 pension contribution can reduce ANI from £110,000 to £100,000 — restoring the full £12,570 Personal Allowance and saving approximately £5,028 in tax. Similarly, reducing ANI from £65,000 to £60,000 via pension contributions eliminates the High Income Child Benefit Charge entirely. **Self Assessment:** ANI is reported on the SA100 Self Assessment return — HMRC calculates it using the figures you provide for income, pension contributions and Gift Aid.

Try the calculator

Related guides

• Uk Self Assessment Guide