£100k isn't what it used to be

The short version

Adjusted net income is your taxable income, less the grossed-up value of any personal pension contributions and Gift Aid. HMRC uses it for three things that hit people on good salaries hardest:

• The High Income Child Benefit Charge, which starts above £60,000 and takes the lot at £80,000.
• Your personal allowance, which shrinks above £100,000 and is gone at £125,140.
• Tax-Free Childcare, and in England the free hours for working parents. Go over £100,000 and your household loses both.

Your salary is where it starts. Pension contributions, Gift Aid and your other income all move it, and that's the part worth understanding. If you just want the number, with salary sacrifice, a car scheme or a bonus in it, the adjusted net income calculator does the full version.

How HMRC works it out

It's four steps, straight from HMRC's own guidance:

1. Start with your taxable income. Salary and bonuses, self-employed profit, rent, any pension you're drawing, savings interest, dividends and foreign income. Take off anything already paid gross into a pension, and any trading losses. A workplace pension on a "net pay" arrangement comes out of your pay before tax, so it's already gone by this point.
2. Take off Gift Aid, grossed up. Every £1 you give counts as £1.25.
3. Take off personal pension contributions, grossed up. If your provider claims 20% tax relief for you, as a SIPP or most personal pensions do, every £1 you pay in counts as £1.25.
4. Add back any tax relief you claimed on trade union or police federation payments. For most people that's nothing.

Salary sacrifice works a different way. The pay you give up never becomes your salary, so it never appears at step 1. The effect on adjusted net income is the same, and you save National Insurance too.

The lines it decides

For 2026/27, Child Benefit is £27.05 a week for your first child and £17.90 for each child after that. With two children that's £2,337 a year, and it's all taken back once you reach £80,000.

Why £100,000 to £125,140 costs 60p in the pound

In that band, every extra £1 you earn costs 40p in higher-rate tax. It also takes 50p off your personal allowance, and that 50p is then taxed at 40% as well, which is another 20p. Add them up and you're paying 60% income tax, plus 2% National Insurance on a salary.

In Scotland the advanced rate of 45% covers the whole band, so there it's 67.5%.

It works the other way round too. Every £1 you take off adjusted net income in that band saves the same 60p. There's more on the £100k line itself, and the ways people get back under it, in your payslip is a menu now.

A worked example: £110,000 and two children

Someone in England earns £110,000, pays nothing into a pension of their own and claims Child Benefit for two children.

• Adjusted net income: £110,000.
• Personal allowance: £12,570 minus £5,000, so £7,570.
• Child Benefit charge: all of it, £2,337.
• Tax-Free Childcare: not available, because they're over £100,000.

Now say they pay £8,000 into a personal pension. The provider adds £2,000 in tax relief, so £10,000 goes into the pot and adjusted net income drops to £100,000.

• Their full personal allowance comes back. That's £2,000 less income tax.
• Higher-rate relief on the contribution, claimed through Self Assessment, is another £2,000.
• So £10,000 in the pension costs them £4,000 out of take-home pay.
• They pass Tax-Free Childcare's income test again. The government adds £2 for every £8 paid in, up to £2,000 a year per child.
• The Child Benefit charge doesn't change. At £100,000 it still takes all of it. It only starts to ease below £80,000.

Doing the same £10,000 through salary sacrifice also saves 2% National Insurance, which is £200, plus your employer's National Insurance if they pass it on. From April 2029 the National Insurance saving only applies to the first £2,000 a year you sacrifice. The effect on adjusted net income stays the same.

This shows how the rules work. It isn't advice. Money in a pension is locked away until minimum pension age, which is 55 now and 57 from April 2028, and what makes sense depends on the rest of your situation.

Not the same as "adjusted income"

The taper on the pension annual allowance uses a different measure with an almost identical name. Adjusted income starts from net income and adds back pension contributions, your employer's included. It only matters above £260,000 (with threshold income over £200,000). Above that, the £60,000 annual allowance falls by £1 for every £2 over, down to a floor of £10,000.

People mix the two up all the time. If you're anywhere near those figures, the pension annual allowance calculator works out the taper for you.

Where people get it wrong

• Using their salary. Someone on £105,000 who pays £6,000 into a personal pension has £7,500 taken off, so their adjusted net income is £97,500. No taper, and Tax-Free Childcare is still there.
• Forgetting their other income. Rent, savings interest and dividends all count. A £96,000 salary plus £6,000 of rent is over the line.
• Forgetting the gross-up. Pay £4,000 into a SIPP and £5,000 comes off, not £4,000.
• A bonus late in the year. A March bonus can push the whole tax year over £100,000. It's the year that counts, not the month.
• Only thinking about themselves. Childcare looks at both parents, and the Child Benefit charge falls on whichever of you has the higher adjusted net income.

Frequently asked

This is general information, not financial advice. The figures WealthR shows are illustrative and depend on the inputs you provide. For decisions involving significant sums, please consult a qualified FCA-regulated financial adviser.