Adjusted net income
The adjusted net income is your total taxable income, including your Personal Allowance piece of your income (which is tax-free) but without tax reliefs like losses from previous years, pensions contributions, or donations to charities.
Why should you care about knowing your adjusted net income?
When your adjusted net income goes over certain thresholds, it might affect you:
- If your adjusted net income is over £100,000, you lose your Personal Allowance gradually. Once your adjusted net income reaches £125,000, you have no more Personal Allowance at all
- If you’re a parent claiming Child Benefit and your (or your partner’s) adjusted net income goes over £50,000, then you need to pay some of it back. Over £60,000? You need to pay all of it back. This payment is called the High Income Child Benefit Charge.
Let’s assume Humza is a product manager with a total taxable income of £130,000:
- He earns £110,000 from employment and another £20,000 from freelancing (self-employment) on the side
- He also makes additional pension contributions of £2,400
- Humza’s adjusted net income is £127,600 (£130,000 minus £2,400)
- Because his adjusted net income is over £125,000, he loses his Personal Allowance entirely. He also needs to file a tax return.
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