Impact of salary sacrifice benefits on Adjusted Net Income calculation

I have found answers to the general calculation of ANI (https://www.gov.uk/guidance/adjusted-net-income) in this forum as related to assessing the £100k threshold in particular on how to deduct pension contributions, however I find no reference to the potential impact of certain benefits on the ANI calculation. Namely, there are certain benefits (e.g. Life assurance, critical illness, lifestyle) which are paid under salary sacrifice as they are exempt from income tax and NI contributions. On my payslip the "taxable gross" appears to deduct these benefits (as they are tax exempt). Question: 1) When assessing the ANI and taxable gross income, can/should these employer benefits under salary sacrifice be deducted from the income to calculate ANI?

Hi,

When working out your adjusted net income, you do not include any pension payments made under net pay arrangements, these are deducted from salary before the employer provides PAYE and are ignored for the purposes of calculating adjusted net income.

Thank you.

Many thanks for this reply however you have not addressed the specific question raised. The position on pension payments/benefits is very clear and well documented throughout this forum. My question as posed is specifically related to non-pension employer benefits such as those benefit examples given in the above post (salary sacrifice life assurance etc. which do not get included in the P60/payslip taxable gross income). As these are salary sacrifice can the gross taxable income be taken for ANI, or do these non-pension benefits need to be added to the gross taxable income to calculate the ANI?

Hi,
 

Adjusted net income (ANI) is calculated as Total taxable income, minus gift aid donations, minus pension contributions (grossed up where your provider has already given tax relief).  Add back payments to trade unions or police organisations.  There are some examples at: Personal Allowances: adjusted net income .   EIM21600 provides an alphabetised list of benefits and expenses payments: Employment Income Manual  .  You would need to review the list and apply it to the calculation method at the examples link. Thank you.

Can you help with a reference to the legal definition (or a government source) of 'total taxable income'. Common use of english would lead you to believe that if you reduce your income through salary sacrifice, in a way that it is not taxable, then your taxable income is lower. But for some reason there is no example that includes childcare vouchers, or cycle to work, or any other qualifying salary sacrifice arrangements. Its a very common circumstance. People are asking this question and you're not answering, meaning they risk doing things wrong, increasing unnecessary enforcement activity.

Hi Optimuswolf,

When referring to Adjusted Net Income please see
Personal Allowances: adjusted net income
where there is also further information regarding 'Taxable Income'

Thank you.
 

Is there no way you can just answer the specific question, because the provided page is honestly quite useless. It's confusingly written and provides no mention of salary sacrifice schemes, suggesting that only pension contributions get deducted, even if you have other pre-tax arrangements that are nothing to do with pension!

Try again, for Adjusted Net Income, should the P11D value (benefit in kind) be included as part of the calculation.

@RRaymo94 You cannot deduct salary sacrifice pension contributions in an adjusted net income calculation as you aren't contributing to the pension. You are agreeing to a lower salary in return for employER pension contributions. Your adjusted net income calculation starts with your taxable pay. Hint. Your taxable pay will be less than your salary because of sacrificing some salary.

Hi jacw001,

These should be added on.

Thank you.

Hi, I earn £97,000 as a basic salary. My bonus will be about to take me over - ending up on £107,000. If I pay £7,000 as a lump sum into my workplace pension will that make my adjusted net income £100,000? Or do I have to pay the £7,000 into a separate private pension?

Hi Tipton91,
If the pension contributions are deducted from your gross pay this will already be reflected in your net income figure.
If the pension contributions are from your net pay then this would reduce the net income figure. 
Thank you.

This is a frustrating thread as there's no straight answer provided. I have a case where salary sacrifice is used for a workplace nursery benefit. This reduces 'taxable income' on the payslip but how does this impact adjusted net income? The client would like to continue to qualify for free childcare hours with adjusted net income below £100k, they've just had a pay increase to £108k a year but salary sacrifice £2k/month to workplace nursery benefit. Please explain how this should be treated. Thanks

Gregory Deer

If salary sacrifice already reduced the income so not taken off again for adjusted net income. 

Thank you

That makes sense, thank you. Looking into this further, there are complex rules around workplace nursery care but it looks as though this case the nursery meets requirements for salary sacrifice, therefore reducing adjusted net income.