Calculating adjusted net income for tax free childcare / 30 free hours

Hello, looking for some guidance on calculating adjusting net income. My taxable income for the 2023/24 financial year is £101,000. This includes a deduction of £6,000 that my employer takes from my salary before tax. Looking at guidance, I believe this means my adjusted net income for the year is £96,000 (therefore bringing me below the £100k threshold meaning I qualify for a number of chilcare support schemes). However I want to check this is correct, because it feels like my pension contributions are deducted twice - once when calculating my taxable income (as my employer takes the contributions before tax) and then counted AGAIN as a deduction from my taxable income to work out my adjusted net income? Can you advise? Thanks!

Hi,
If the pension contributions are taken from your income before your tax is calculated then you have already received the tax releif and this would not be deducted again for the adjusted net income:
Personal Allowances: adjusted net income
Thank you.

Hi Katie Allsopp,
If your pension contributions are deducted from your wage before the tax is calculated then you have received relief for these contributions and you do not deduct again for the adjusted net income. So if your taxable income was £101,000 which is your gross income minus the £6000 pension contributions then the £101,000 is the net adjusted figure. 
Thank you.

Hi HMRC Admin 2 Where do I need to contact to find that information out? Thanks

Hi M 22, Please find the contact details here:"https://www.gov.uk/government/organisations/hm-revenue-customs/contact/self-assessment">Self Assessment: general enquiries Thank you.

Hello, please could somebody confirm what period and frequency the adjusted net income is assessed on for the free childcare hours? Eg is it the earnings for 23/24 tax year which determine eligibility for all of 24/25 or an estimate of 24/25 earnings? How often do you need to disclose this information and what then happens if your eligibility status changes from previous period/expected earnings. With previously earning >£100k but then being on maternity pay and then returning part time it is unclear whether I will end up eligible or not. Thanks

Hi Jess F, To give you the correct advice, we may require more information. Please contact our Childcare Service helpline here to allow us to advise you further: Childcare Service helpline Thank you.

I've just had a call with HMRC that my collective earnings will go to 101,000. These are made up from a salary of 87.5k and and a rented flat at 13.5k. I've just sold the flat as of March 31st 2024. The agent on the phone said I could potentially bring earnings down by putting money in a private pension. 1) How much would I need to put in the private pension to bring me back under? 2) As the flat is now sold, but I owned it for all of the previous tax year, is the above private pension even an option i.e. aren't they going to continually calculate my net income based on the entire previous tax year, so I can't affect it now? 3) Or if not the case, and I immediately place X amount into a private pension, when will I be able to claim childcare again? Thanks for any help.

Hi Richard 
If you pay into a private pension from your net wage and you pay tax at the higher rate then you can claim relief on your pension contributions Tax on your private pension contributions.
For 2023/24 this would cover the dates 6 April 2023 to 5 April 2024. If you sold the flat in March 2024 then would still be in that tax year.
Thank you

Good morning, I have been going round in circles for months trying to establish whether I am subject to The High Income Child Benefit Charge for the financial year 2023-24 and whether I need to complete a self assessment form. Please can you confirm either way? In 2023-24 according to my P60 I earned £50,936.97 (gross) from my employer. I also earned £672.44 on savings interest. My P60 does not mention that £2659.88 was deducted from my salary as pension contributions (as part of a salary sacrifice scheme), which I believe are not taxed until I draw my pension. Does this mean that my adjusted net income is less than £50,000 and that I am not subject to The High Income Child Benefit Charge and do not need to complete a self assessment form? If you are able to confirm simply and plainly either way that would be greatly appreciated. Thank you. Stuart

Hi,
Your income is £50,936.97 (plus savings interest) after your salary sacrafice pension payments, so your ANI is over £50K - this means your are subject to the Higher Income Child Benefit Charge, and must complete a Self Assessment tax return.
Thank you.

Hi, I'm not sure if I should post on here or start an new thread but will try here first. My situation for the 2024/25 tax year is as follows (slightly simplified for ease of understanding): Gross income from employment £111,500 Interest income £1,500 P11D benefits (health insurance) £2,000 Total gross income £115,000 I need to have under £100,000 of adjusted net income in order to get my free childcare, so plan on making a contribution of £14,000, out of my net salary, into my SIPP. This will then be grossed up by my pension provider (14,000 x 1.25 = £17,500) The question I have is does this then reduce my net income for free childcare purposes to £97,500 (£115,000 - £17,500)? P.S. I have made the (prudent to my mind) assumption that P11D benefits are included in the net income calculation, if you could clarify this too that would be helpful. Thank you

Hi, Your calculation is correct, including your assumption about your P11D benefits being included in your calculation. This is confirmed here - Personal Allowances: adjusted net income Thank you.

Hi HMRC team Let say I have an estimated taxable income of 110k and intend to gift charitable donation (10k), would that bring my adjusted net income to: £100000 - £12500 (with gift aid) = £97500 hence below the threshold? Would it be okay if I confirm my eligibility for tax free childcare and funded hours as long I manage to bring the adjusted net income below threshold? Many thanks for your guidance.

Hi  L18,
Your calculation is correct, as per the adjusted net income guidance detailed here: Personal Allowances: adjusted net income To allow us to confirm your eligibility for tax free childcare, you would neeed to contact us: Self Assessment: general enquiries Thank you.

Hi HRMC team It is quite clear that a lot of people (myself include) do not understand how to calculate the adjusted net income. Maybe a tool from HRMC in the future could be nice ;) Anyway, my question is quite simple: if we apply for free childcare and say that we are below < 100K for adjusted net income (since we do not know how to calculate) so we get some free chilcare. Let s say that after a few weeks/months, we or HRMC realize that we made a mistake and the adjusted net income is actually > 100K then what happens? Do we need to refund HRMC of I dont know how much in one go ? Or is it deducted from payslip with tax code change? Let me know Thank you

Hi mimi3737,
If you find that a change in your income takes you over the £100K limit, or that an error was made in your previous calculation, contact our Child Benefit team by webchat or phone via: Child Benefit: general enquiries, who can advise you further.
Thank you.

Hi HMRC ADMIN 20 Thank you for the response and the link (I assume from the fact you refer to P11D that you are replying to me?) Oddly it was that very page that caused the confusion, I called the helpline to clarify my position (mainly the P11D point but I ran the girl through the above example) and she was adamant that my grossing up of the pension was incorrect, referring me to the 'Bill' example. I tried to discuss with her about Bill's payment being without tax relief and mine not, but she didn't seem to understand so I came here. Anyway, I think I am comfortable with it now, I will refer to this page if there is any trouble at year end! Thanks

Hi There, My annual income just about exceeds £100k, and I have interests in both a limited liability partnership and limited company. In addition to my basic salary, I receive profit share from the partnership and dividends from the limited company. I have heard from others that they exclude dividends when making the adjusted net income estimate. If I did this in my case (i.e. only counted salary and profit share) then my annual income would be under £100k, thereby enabling me to qualify for 30 hours of free childcare. Is this permissable under the latest HMRC rules? Thank you, M

dividends from company shares are included in the adjusted net income calculation adjusted-net-income