Adjusted net income (ANI) is one of the most important numbers to understand when your income is approaching certain UK tax and childcare thresholds. It is not necessarily your salary, your taxable pay on one payslip, or the amount that reaches your bank account. For the wider picture, read the £100k tax trap guide.
HMRC defines adjusted net income broadly as total taxable income before Personal Allowances, less certain tax reliefs. That means employment income can be only one part of the calculation. Taxable benefits, self-employment profits, pension income, savings interest, dividends, rental income and some foreign income may also matter. Certain pension contributions, Gift Aid donations, trading losses and other permitted reliefs can then affect the figure.
For 2026/27, ANI matters especially once it exceeds £100,000 because the standard £12,570 Personal Allowance begins to be withdrawn. ANI is also used for the High Income Child Benefit Charge, and expected ANI is relevant to the £100,000 upper-income eligibility test for Tax-Free Childcare and England’s Free Childcare for Working Parents.
QUICK ANSWER: Do not use salary alone when checking the £100,000 threshold. Work out your relevant taxable income and then apply HMRC’s permitted ANI adjustments.
What is adjusted net income?
Adjusted net income is a threshold-testing figure used by HMRC. The starting point is your total taxable income before Personal Allowances. You then deduct specific reliefs that HMRC says belong in the ANI calculation.
The distinction matters because two people with the same salary can have different ANI. One might receive a taxable bonus and savings interest. Another might have qualifying pension contributions or Gift Aid. Their headline salaries could match while the figures used for HMRC thresholds differ.
HMRC currently lists the income-related reduction to the Personal Allowance and the High Income Child Benefit Charge among the rules affected by ANI. The same concept also appears in the eligibility tests for Tax-Free Childcare and Free Childcare for Working Parents.
What income should you include?
Start by identifying all relevant taxable income for the tax year. Depending on your circumstances, this can include salary and wages, taxable bonuses, taxable employment benefits, self-employment profits, pension income, taxable savings interest, dividends, rental or property income and taxable foreign income.
Do not assume that income outside PAYE can be ignored. For example, someone with a £98,000 salary plus £3,000 of taxable interest and dividends could already have £101,000 before any permitted ANI adjustments.
Likewise, do not confuse gross receipts with taxable profit where the tax rules use profit. If you have self-employment, property, foreign income or more complex reliefs, use HMRC’s detailed guidance or professional tax help rather than forcing every item into a simple salary calculation.
How to calculate adjusted net income step by step
A practical HMRC-based workflow is:
1. Add together your taxable income from the relevant sources for the tax year.
2. Deduct qualifying trading losses and other reliefs that HMRC permits in the ANI calculation.
3. Account correctly for qualifying pension contributions.
4. Deduct the grossed-up amount of qualifying Gift Aid donations.
5. The resulting figure is your adjusted net income.
The pension step deserves care. HMRC says pension contributions paid gross and contributions where the pension provider has already given basic-rate relief can be relevant. Where relief at source applies, the amount used is grossed up. For example, if you pay £800 and the provider adds £200 basic-rate tax relief, the gross amount is £1,000.
This is why simply subtracting whatever appears as ‘pension’ on a payslip can be wrong. Net pay arrangements, relief at source and salary sacrifice are not identical mechanisms.
Worked example 1: salary plus bonus
Suppose Maya has £96,000 of employment income and receives a £9,000 taxable bonus. Before considering any other income or permitted adjustments, that gives £105,000.
If £105,000 is also her ANI, she is £5,000 above the £100,000 Personal Allowance income limit. The allowance falls by £1 for every £2 above the limit, so £2,500 of her £12,570 standard Personal Allowance would be withdrawn. That leaves £10,070.
The lesson is not that every £105,000 earner has exactly the same tax bill. It is that the ANI figure, rather than salary alone, determines the Personal Allowance taper.
Worked example 2: interest and a relief-at-source pension contribution
Now imagine Ravi has £99,000 employment income and £3,000 of taxable savings interest. His starting total is £102,000.
He also makes a qualifying relief-at-source pension contribution of £1,600, with £400 basic-rate relief added by the provider. The gross contribution is £2,000. If that contribution is deductible under the ANI rules, the illustrative ANI becomes £100,000.
Without the relevant adjustment, £1,000 of Personal Allowance would have been withdrawn at £102,000 ANI. With ANI at £100,000, the Personal Allowance taper has not started. This is an illustration of the mechanism, not a recommendation to make a pension contribution.
Gift Aid and adjusted net income
Qualifying Gift Aid can also affect ANI. HMRC uses the grossed-up donation. If you donate £80 under Gift Aid, the charity can normally claim £20 basic-rate tax, making the gross amount £100 for this calculation.
Keep records and check that the donation qualifies. A casual charitable payment should not automatically be treated as a Gift Aid adjustment.
Why ANI matters at £100,000
For 2026/27, the standard Personal Allowance is £12,570. It is reduced by £1 for every £2 that ANI exceeds £100,000 and reaches zero at £125,140.
That withdrawal creates the well-known effective 60% marginal Income Tax effect for part of the range under the England, Wales and Northern Ireland main rates. Our detailed £100k Tax Trap guide explains the arithmetic.
To model the allowance directly, use the MoneySavvyUK 60% Tax Trap Calculator.
ANI and Child Benefit
Adjusted net income also matters much lower down the income scale for families receiving Child Benefit. Under current rules, the High Income Child Benefit Charge starts above £60,000 ANI. The charge is 1% of Child Benefit for every £200 above £60,000, reaching the full amount at £80,000.
That is a separate calculation from the £100,000 Personal Allowance taper. Do not wait until £100,000 before checking Child Benefit implications.
ANI and the £100,000 childcare eligibility test
Tax-Free Childcare currently says you cannot claim if you or your partner’s expected ANI, including foreign income, is over £100,000 for the current tax year. England’s Free Childcare for Working Parents uses the same £100,000 expected-ANI upper-income condition.
This is important because the childcare eligibility condition does not work like the Personal Allowance’s gradual £1-for-£2 taper. Read our £100k income threshold and childcare guide for the differences and always check the current GOV.UK eligibility page before acting.
Common adjusted net income mistakes
Mistake 1: using salary as ANI. Other taxable income can change the result.
Mistake 2: forgetting taxable benefits, interest, dividends or property income.
Mistake 3: subtracting a pension contribution without checking how the contribution was made.
Mistake 4: using the net amount of a relief-at-source pension contribution or Gift Aid donation when HMRC requires the grossed-up amount.
Mistake 5: assuming every government threshold uses the same definition of income.
Mistake 6: calculating from a monthly payslip instead of considering the whole tax year.
Mistake 7: treating an illustrative calculator as a substitute for HMRC guidance where circumstances are complex.
Adjusted net income FAQ
Is adjusted net income the same as taxable income? No. ANI starts from taxable income before Personal Allowances and then applies specified adjustments for particular threshold tests.
Does a work bonus count? A taxable employment bonus can form part of the income included in ANI.
Does savings interest count? Relevant taxable savings income can be included even when it is not shown in salary.
Can pension contributions reduce ANI? Certain pension contributions can affect ANI, but the treatment depends on the contribution method.
Can Gift Aid reduce ANI? Qualifying Gift Aid is one of the reliefs HMRC identifies, using the grossed-up amount.
What if I live in Scotland? ANI is still relevant to the Personal Allowance taper, but Scottish Income Tax rates differ for non-savings, non-dividend income. Do not copy an England/Wales/Northern Ireland marginal-rate example without checking Scottish rates.
Where can I calculate the taper? Use our 60% Tax Trap Calculator, then verify the underlying income and adjustments against HMRC guidance.
Official sources
https://www.gov.uk/guidance/adjusted-net-income
https://www.gov.uk/income-tax-rates
https://www.gov.uk/child-benefit-tax-charge
https://www.gov.uk/tax-free-childcare/check-if-youre-eligible
https://www.gov.uk/free-childcare-if-working/check-youre-eligible
MoneySavvyUK provides general information and illustrative tools, not personalised tax, pension or financial advice.
Read next: our complete £100k tax trap guide explains the Personal Allowance taper and childcare cliff edge.