Tax Glossary

Adjusted Net Income

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Last updated on:
March 17, 2024

Your adjusted net income represents your total taxable income, encompassing earnings such as your wage, rental income, and freelance revenue. It excludes tax reliefs like past financial losses, pension contributions, and Charitable Donations. However, in a twist, it does include your Personal Allowance—the initial £12,570 of your income that's exempt from tax.

Why is your adjusted net income important?

Crossing specific income thresholds based on your adjusted net income can trigger the need to file a tax return or repay certain benefits.

Above £100,000:

Your Personal Allowance diminishes gradually. For every £2 earned above £100,000, your Personal Allowance decreases by £1, disappearing entirely once your income hits £125,140.

For parents receiving Child Benefit:

If you or your partner's income exceeds £50,270, a portion of the Child Benefit must be repaid. Surpassing £60,000 means repaying the entire benefit through the High Income Child Benefit Charge.

For those born before April 6, 1938:

Individuals in this category see a reduction in their Higher Personal Allowances once their adjusted net income surpasses £27,700.

Illustrating adjusted net income:

Consider the scenario of Alex, an architect, with a total taxable income of £155,000—comprised of £125,000 from employment and £30,000 from freelance work. After contributing £3,000 to a pension, Alex's adjusted net income calculates to £152,000, exceeding the £150,000 mark. Consequently, Alex is required to complete a tax return.

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