What is adjusted net income?

Full answer

Adjusted net income (ANI) is a specific HMRC measure used to test eligibility for certain allowances and charges. It is not the same as your salary or your taxable income. To calculate it, start with your total taxable income — salary, self-employment profits, rental income, savings interest, dividends, pensions and most other taxable income. Then deduct: the gross amount of personal pension contributions (the contribution plus the basic-rate tax relief added), the gross amount of Gift Aid donations, and certain trading losses or payments. The result is your adjusted net income. Why it matters: two of the most painful UK tax thresholds are tested against ANI rather than gross salary. First, the Personal Allowance taper removes £1 of your £12,570 allowance for every £2 of ANI above £100,000, fully gone at £125,140 — creating a 60% effective marginal rate in that band. Second, the High Income Child Benefit Charge applies where ANI is between £60,000 and £80,000, clawing back Child Benefit by 1% for every £200 over £60,000. Worked example: someone with a £110,000 salary makes a £10,000 gross personal pension contribution. Their ANI falls to £100,000, restoring the full Personal Allowance and avoiding the 60% trap entirely — so the effective cost of that contribution is far lower than it looks. Gift Aid donations work the same way. Use the Income Tax or Pension calculator to see how contributions change your adjusted net income.

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More answers

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