The short version: Your adjusted net income is your total taxable income minus things like pension contributions and Gift Aid donations. HMRC uses this figure to work out if you need to pay back Child Benefit or if you’ve lost your Personal Allowance.
Why does it matter?
A few key thresholds kick in based on your adjusted net income.
Over £100,000? You start losing your Personal Allowance. For every £2 you earn above £100k, you lose £1 of that £12,570 tax free amount. By £125,140, it’s gone.
Over £60,000 and claiming Child Benefit? You’ll need to pay some of it back through the High Income Child Benefit Charge. Over £80,000 and you pay all of it back.
Can I reduce it?
Yes. Pension contributions and Gift Aid donations both bring it down. So if you’re near one of those thresholds, topping up your pension could save you a fair bit.
Not sure where you stand? Give us a shout and we’ll work it out for you.
