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 that is liable to the high income child benefit charge where they have an adjusted net income above £50,000.

In order to work out adjusted net income, you 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. To complete the calculation for adjusted net income, tax relief of up to £100 is available for payments to trade unions or police organisations and can be added back.

Taxpayers should be aware that there is no automatic entitlement to the Income Tax personal allowance.