What is Adjusted Net Income?
Adjusted Net Income, or ANI, is the figure HMRC uses to work out whether your Personal Allowance is reduced and whether certain charges or benefits apply, such as:
- the £100,000 Personal Allowance taper
- Tax-Free Childcare
- the High Income Child Benefit Charge
Important: ANI is usually not shown on your payslip. You normally have to work it out yourself.
The calculation follows a specific order:
- Total taxable income (employment, self-employment, dividends, rental, savings interest, etc.)
- Minus gross pension contributions (salary sacrifice + Relief at Source, grossed up)
- Minus gross Gift Aid donations (your net donation x 1.25)
- Equals Adjusted Net Income
What counts as income
Your ANI includes all taxable income:
- Employment income: gross salary, bonuses, commissions, RSU/share vestings, taxable benefits-in-kind
- Self-employment income: net profit from your trade or profession
- Dividend income: all dividends (before the £500 Dividend Allowance)
- Rental income: your taxable rental profit after allowable expenses. Finance costs such as mortgage interest do not reduce ANI in the same way.
- Savings interest: gross interest (before the Personal Savings Allowance)
- Pension income: any taxable pension or annuity payments
It does not include ISA income, the tax-free portion of a pension lump sum, or any income that is genuinely exempt from UK tax.
What reduces your ANI
Two types of payment reduce your ANI:
Pension contributions
- Salary sacrifice contributions: reduce your gross salary directly
- Relief at Source contributions: gross value (your net contribution / 0.8) reduces ANI
- Net Pay Arrangement contributions (some public sector schemes): reduce gross salary
Gift Aid donations
- Your net donation is grossed up by 25% (divided by 0.8)
- The gross amount reduces your ANI
- You need to have actually made the donation in the tax year
Trading losses and certain other deductions can also reduce ANI in specific circumstances, but pension and Gift Aid cover the vast majority of cases.
See your exact numbers
Enter your salary, pension and household details. CliffGuard calculates your ANI, marginal rate and shows you exactly how much you could save.
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Worked example
Sarah earns £115,000. She pays £5,000 per year into a SIPP (net) and donates £200/month to charity via Gift Aid.
| Step | Amount |
|---|---|
| Gross salary | £115,000 |
| Other income | £0 |
| Total taxable income | £115,000 |
| Gross pension (£5,000 / 0.8) | -£6,250 |
| Gross Gift Aid (£2,400 / 0.8) | -£3,000 |
| Adjusted Net Income | £105,750 |
Sarah is still in the 60% trap. To reach £99,999 she needs an additional £5,751 reduction. If she increases her SIPP contributions by £4,601 net (£5,751 gross), her ANI drops to £99,999 and she restores her full Personal Allowance.
Common mistakes
Forgetting to gross up SIPP contributions. If you transfer £8,000 into a SIPP, the gross contribution is £10,000 (your provider claims £2,000 from HMRC). It is the £10,000 that reduces your ANI, not the £8,000.
Including salary sacrifice twice. Salary sacrifice reduces your gross salary. Do not also subtract it as a pension contribution. It is already reflected in the lower salary figure.
Ignoring RSU vestings. If your employer grants shares that vest during the year, the taxable value at vesting counts as employment income and increases your ANI. Many people miss this and are surprised when their P60 shows a higher figure than expected.
Using take-home pay instead of gross. ANI starts from gross taxable income, not what hits your bank account. Your P60 shows the right starting figure.