Adjusted Net Income (for Tax Free Childcare) Again sorry.

Hi, I'm going to earn slightly over the £100k threshold this year. As much as I read through forums, I'm still confused. I understand you can take off Gift aid(1) grossed up x .25(?) to adjust your net pay. With regards to Pension - my contributions of c.£9k through salary sacrifice. Does this equate to item 2? And then can AVC's be grossed up(3)? 1. donations made to charities through Gift Aid - take off the ‘grossed-up’ amount 2. pension contributions paid gross (before tax relief) 3. pension contributions where your pension provider has already given you tax relief at the basic rate - take off the ‘grossed-up’ amount Thanks - From a confused tax payer.

Hi Luke Kemp

1. You deduct the grossed up figure.

Salary Sacrifice would be deducted before tax therefore the would be classed as 2.

AVC would be grossed up to include the basic rate relief.

Thank you. 

Thanks, I'm a bit confused, since some posts say that pension contributions via salary sacrifice can be deducted and others say it they can't. But, if I've paid £9k in pension contributions through salary sacrifice, these can be deducted for the adjusted net income calculation?

Hi Luke Kemp,

When you use salary sacrifice, then you take a lower salary.
Your employer makes a pension contribution on your behalf, but as it is not you who is making the contribution, you can't deduct it from your adjusted net income, and there is no grossing-up. 
When using salary sacrifice, you need to look at your reduced salary - this is normally the figure already shown on your P60 for the year.

Thank you.

HMRC Admin, this is a very clear response thanks. However, I asked this exact question on the phone with an HMRC rep today. I.e. "If I reduce my salary by salary sacrifice contributions into a pension, does that lower my taxable income to make me eligible? I was told that "yes, but", these pension contributions would be added back to my "adjusted net income" as it is "potentially taxable income" and they have gained tax relief by not being taxed in the first place. Therefore I would not be eligible for Tax Free Childcare. I ended up phoning twice due to the confusion. The agent apologised that this was not clear on the website. As a example, if you earn pre-tax £110,000 and salary sacrifice £20,000 into a pension, your taxable income would be £90,000. But according to what I was told by HMRC twice today, that £20,000 would be added back into the calculation and you would not be eligible for tax free childcare.

Hi, thank you for the information shared so far but i also talked on the phone with an agent and different information were given. Could you please help me understand? lets say my gross annual salary is exactly £100k but also do a salary sacrifice of £8k per year which goes to my pension fund (my employer makes the deposit to the pension fund. in the pension fun these are clearly labelled as my contributions as additional to my employers). Based on this am I eligible for the tax free childcare? as the guidelines say for over 100k or below 100k not for 100k exactly and doesnt say if my pension contributions as salary sacrifice should be included meaning when i am confirming my details my adjusted income is 100k or 100k -8k if eligible for the childcare with the 100k or the 92k. thank you again

Hi Fiv23,
Salary sacrifice pension contributions are classed as employers contributions and not yours so you cannot deduct these to work out your adjusted net income figure.
Thank you.