Updated on 6 April 2026

Adjusted net income

Adjusted net income is a calculation of income used to identify the amount of some tax allowances and/or whether you or your partner will need to pay the high income child benefit charge.

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Introduction

Adjusted net income is a particular calculation of income set out in tax law.

Adjusted net income is not the same as taxable income – though in some cases the figures will be the same. This will depend on what adjustments you need to make, if any. For some people, there will not be any adjustments and this will mean your total taxable income will be the same as your adjusted net income.

We set out the adjustments that are needed under the heading ‘How adjusted net income is calculated’ below.

When adjusted net income is used

Your adjusted net income is only used to calculate the following:

Personal allowance: The personal allowance is the amount of taxable income you can have before you start to pay tax. In 2026/27 this allowance is £12,570, but it gradually reduces if your adjusted net income in the tax year is more than £100,000.
High income child benefit charge: If you or your partner claim child benefit and one of you has adjusted net income of more than £60,000 in a tax year, some or possibly all of the child benefit paid in that year will need to be repaid to HMRC – this is called the high income child benefit charge.
Tax-free childcare: Tax-free childcare is a government scheme through which you pay your childcare costs and the government makes a top-up contribution. There are several eligibility rules. If you or your partner expect to have adjusted net income of over £100,000 you cannot claim tax-free childcare.
Married couple’s allowance: Married couple’s allowance is only available if at least one spouse or civil partner of a couple was born before 6 April 1935. If the person claiming married couple’s allowance has adjusted net income of more than £39,200 the allowance is reduced.

There are some other tax allowances and benefits that are withdrawn or reduced depending on your level of income or the rate of tax you pay. These are not specifically linked to your adjusted net income, as this calculation is only relevant for the specific items shown above. See heading ‘When adjusted net income is not used’ later in this page.

How adjusted net income is calculated

These are the main steps that you need to follow to calculate your adjusted net income for a tax year:

Step 1 – Calculate your net income

Add up all of your taxable income, including amounts such as:

Employment income - your taxable income before tax plus the taxable value of any non-cash benefits provided by your employer such as a company car or private medical insurance.
Other earnings, e.g. profits from your self-employment business (sole trade or partnership).
Rental income.
Pension income - your pension income before tax, including your state pension.
Income from savings and investments, e.g. interest on your savings accounts and dividends on any company shares you own, but excluding income from ISAs.

There are some tax reliefs that can then be deducted to calculate your net income, for example:

Trading losses.
In rare cases, pension contributions paid gross on which no tax relief has been claimed, for example payments to a retirement annuity scheme. See step three below for more information about pension contributions in more common situations.

No deduction can be taken in this calculation for any foreign income or foreign employment income arising from 6 April 2025 in respect of which relief is claimed under the foreign income and gains regime.

The amount left is your net income.

Step 2 – Deduct your Gift Aid donations

If you have given any money to charity and made a Gift Aid declaration to the charity, take off the gross amount of the donation. This is calculated as an extra 25p for every £1 you donated. For example, if you donated £1 to charity, you should take off £1.25 from your net income.

Step 3 – Deduct your pension contributions (relief at source schemes only)

If you have paid any amounts into a relief at source pension scheme, you should deduct the gross amount of the contribution. A relief at source scheme can be a private or employer pension, and you only pay 80% of the contribution, which is the net amount. The pension scheme then claims the remaining 20% directly from HMRC. This 20% is often referred to as ‘basic rate tax relief’.

Gross pension contributions under a relief at source scheme are calculated as the total amount you paid, plus the 20% tax relief. This can be worked out as an extra 25p for every £1 you contributed to your pension. For example, if you made a net pension contribution of £100 under a relief at source scheme, you should take off £125 from your net income when calculating your adjusted net income.

If you are an employee and pay into a pension under a ‘net pay arrangement’ or under salary sacrifice, you do not need to deduct your pension contributions when calculating your adjusted net income. Contributions should already have been deducted from your taxable employment income, and this would already be reflected on your P60/P45 for the year.

Step 4 – Other adjustments

Depending on your personal situation there may be some items of tax relief to add back when working out your adjusted net income. Further information about these reliefs can be found on GOV.UK.

Example – calculating adjusted net income

Jill is married to Steve and they have one child. Jill is employed full time and Steve stays at home to look after their child. He has no income and claims child benefit. Jill wants to calculate her adjusted net income for the 2026/27 tax year to understand whether she will need to pay the high income child benefit charge.

Step 1:Jill has net income of £61,600

	£
Employment income	60,000
Medical insurance (employment benefit)	1,000
Interest on savings	600
Net income	61,600

Step 2: During the tax year Jill donated £160 to a charity and made a Gift Aid declaration. The gross amount to take off from her net income is £200 (calculated as £160 x 100/80).

Step 3: Jill paid £1,200 into her pension. Her pension provider added tax relief of £300 to her pension pot as it was a relief at source scheme. The gross amount to take off from her net income is £1,500.

Jill’s adjusted net income is £59,900:

	£
Net income	61,600
Take off:
Gross charity donations	- 200
Gross pension contributions	-1,500
Adjusted net income	59,900

Because Jill’s adjusted net income is less than £60,000 she does not need to pay the high income child benefit charge.

When adjusted net income is not used

Strictly speaking, adjusted net income is not used to calculate any of the items listed below. Your level of income may affect these items, but the method of calculating the impact is different:

The amount of personal savings allowance you are entitled to (but see note below).
Your eligibility to claim the marriage allowance (but see note below).
Whether HMRC will take back any winter fuel payment or pension age winter heating payment (from 2025/26 onwards).
Your entitlement to other state benefits, such as universal credit or pension credit.

Note: Even though your personal savings allowance and/or your eligibility to claim the marriage allowance are not specifically based on your adjusted net income, in practice the result will often be the same. The availability of the personal savings allowance and marriage allowance is based on whether your net income – as calculated at step 1 as detailed above – falls into a particular tax band. As your tax bands can be affected by gift aid donations and relief at source pension contributions, this will often give the same outcome as if you had calculated your adjusted net income and tested it against the standard tax bands. The main difference is that you would not have been required to add back the small other tax relief items in step 4 of the adjusted net income calculation.

More information

You can find government information about adjusted net income on GOV.UK.