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Posted Mon, 20 Nov 2023 06:42:35 GMT by George Williams
I am trying to calculate my adjusted net income. However, despite reviewing the regulations and HMRC guidance I find there are two versions of the calculation. Firstly at: https://www.gov.uk/guidance/adjusted-net-income It does not mention adding employer pension contributions to the total. However at: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance It states you must add your employer pension contributions. Are these 2 different net incomes? 1. As an example if my salary were £100,000 gross (assuming zero personal pension contributions) and my employer made pension contribution of £20,000, is my adjusted net income for the purpose of personal allowance £100k or £120k? And for tapered allowance is my net income £100k or £120k? 2. I receive a £1000 dividend (inside dividend allowance). Is this included in my adjusted net income in either case? (Personal allowance or tapered allowance calculation)? 3. Can I see my adjusted net income calculation from previous tax years?
Posted Wed, 22 Nov 2023 16:06:29 GMT by HMRC Admin 20
Hi George Williams,
Adjusted net income - add together the total income liable to income tax
This includes:
income from employment before tax
profits from self employment
employment benefits (for example medical benefit, car benefit)
pensions including State Pension
income from property
gross savings and dividends
deduct any allowable reliefs
This includes:
Professional Subscriptions
Flat Rate Expenses
Job Expenses
Payments to pension schemes that have been made without deduction of tax (a gross payment)
Trading losses (early trade loss, trade loss relief against general income, property loss relief against general income)
Qualifying loan interest payments
deduct any grossed up:
Gift Aid donations
pension contributions
do not deduct any pension payments made under net pay arrangements, these are deducted from salary before the employer provides PAYE and are therefore ignored for the purposes of calculating adjusted net income
add any relief claimed for payments to trade unions or police organisations.                                                                                                                                                                                        Tapered annual allowance is a different thing altogether - this is to determine the amount of money you can pay into your pension without having a tax charge -
HS345 Pension savings — tax charges (2023)
Thank you.
Posted Thu, 23 Nov 2023 07:35:41 GMT by George Williams
Thank, that's very clear. It's just a shame there's so much "advice" on here,on other posts, which doesn't seem to get that distinction correct.
Posted Wed, 31 Jan 2024 10:38:06 GMT by
Hi, The below is how the calculation works on a draft self assessment I have done for 22-23. I have also made a pension contribution (not salary sacrifice but paid after taxes out of my net pay) that had a pension relief added. Pay from all employments £X minus allowable expenses £Y Total from all employments £X-£Y Dividends from UK companies £Z Total income received £X-£Y+£Z My questions are: 1. Is the total income received the "Adjusted Net Income" which has allowable expenses taken off? 2. Do I need to take off the pension contributions I made (without the relief component) to get the Adjusted Net Income? Please clarify. Kind regards, I have also
Posted Mon, 05 Feb 2024 16:31:44 GMT by HMRC Admin 19
Hi,
  1. Yes, that is correct.
  2. If the pension contributions were from your net wage and you are higher rate then you would include the grossed up contribution on your tax retrun to receive the higher rate relief due. The relief is shown on the calculation by extending the basic rate tax band. 
Thank you.

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