It is the single figure that decides whether you keep your full tax-free allowance, lose Child Benefit, or fall into the 60% effective tax trap. Most people have never calculated it.
There is a single number on your tax position that almost nobody calculates until it costs them: adjusted net income. Cross £100,000 of it and you start losing your tax-free allowance. Cross £60,000 of it and you start repaying Child Benefit. Yet it appears on no payslip and no P60.
The calculation runs in three steps. First, add together your total taxable income before any allowance: employment earnings, self-employment profit, taxable savings interest, dividends, rental income and most pensions. For a sole trader, the starting figure is your trading profit, not your turnover.
Second, deduct the grossed-up value of personal pension contributions and Gift Aid donations. "Grossed up" matters: an £80 Gift Aid donation counts as £100, because the charity reclaims the 20% basic-rate tax. A net personal pension payment of £4,000 counts as £5,000.
Third, the result is your adjusted net income. There is no further deduction of the Personal Allowance, which is exactly what trips people up when they compare it to their taxable income.
Adjusted net income is not an academic figure. It triggers two of the harshest rules in the UK system.
The first is the Personal Allowance taper. Once adjusted net income passes £100,000, you lose £1 of your £12,570 allowance for every £2 above the threshold, wiping it out entirely at £125,140. In that band, every extra £100 earned is taxed at an effective 60%.
The second is the High Income Child Benefit Charge. In 2025/26 the charge begins at £60,000 of adjusted net income and rises until Child Benefit is fully clawed back at £80,000. A family with two children loses meaningful money here, and the charge is collected through Self Assessment.
Priya is a self-employed designer with a trading profit of £62,000 in 2025/26 and no other income. She and her partner claim Child Benefit for two children (£2,251.60 a year at 2025/26 rates).
Her starting adjusted net income is £62,000. Because that is £2,000 over the £60,000 floor, she owes a Child Benefit charge of £2,000 ÷ £200 = 10 increments, so 10% of £2,251.60 = £225.16, payable through Self Assessment.
Now suppose Priya pays £2,000 (net) into a personal pension. Grossed up, that is £2,500 of relief. Her adjusted net income falls to £62,000 − £2,500 = £59,500, below the £60,000 floor. The Child Benefit charge disappears entirely, she keeps the full benefit, and she has £2,500 in her pension. You can model exactly this trade-off with the Child Benefit charge calculator.
Adjusted net income is the one number that quietly decides whether a pay rise makes you better off or worse off.
If you are a sole trader, the figure that enters the calculation is your profit after allowable expenses, not your gross income. That gives you a genuine planning lever: legitimate business expenses reduce profit, which reduces adjusted net income, which can keep you below a cliff edge. Combined with pension contributions, careful timing of income and expenses across the tax year can be the difference between keeping and losing thousands of pounds of allowance or benefit. Under Making Tax Digital, mandatory for sole traders with income over £50,000 from April 2026, keeping accurate quarterly records makes this figure far easier to project before year-end rather than discovering it on your tax return.
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