Contact Us

288 Oxford Road, Gomersal
Cleckheaton, BD19 4PY

Search News


How do you calculate adjusted net income?

Source: HM Revenue & Customs | | 13/08/2019

To calculate adjusted net income, you will need to look at a taxpayer’s total taxable income, before personal allowances, and then deduct any trading losses, gift aid donations, gross pension contributions and pension contributions where the pension provider has already provided tax relief at the basic rate.

Calculating the adjusted net income amount is necessary if any of the following apply:

  • A taxpayer is liable to an income-related reduction to the personal allowance - when their adjusted net income is over £100,000 (regardless of their date of birth);
  • A taxpayer is liable to the High Income Child Benefit charge - when their adjusted net income is above £50,000.

It is worth noting when reviewing a client's taxable income that if certain thresholds are exceeded the personal allowance may be withdrawn completely. For example, if a client decides to draw-down a significant lump sum from their pension pot, the payer may deduct 40% Income Tax, but this may not cover all the taxes due. If the amount tips their annual income over the required limit (£125,000 for 2019-20), perhaps for the first time, and their personal allowance is lost, additional taxes may fall due the following January.



 

Latest News

Coronavirus advice
26/02/2020 - More...
Acas has published new guidance for employers and employees on the coronavirus. The guidance covers: what to do if

Last chance for pensions relief?
25/02/2020 - More...
There has been much press speculation that the Government is considering cutting higher rate tax relief for pension

10% reduction in Inheritance Tax rate
25/02/2020 - More...
If your total assets exceed £325,000 then the excess will usually be subject to Inheritance Tax (IHT) at 40% when

Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the Newsletter
» Login

Copyright © 2020 - Calvert Dawson

Cookie Policy | Privacy Policy

           ICAEW-White                       

 

Save

Save