What is adjusted net income?

Adjusted net income is the figure HMRC uses for the income limits that matter most to families: the £100,000 limit for funded childcare and Tax-Free Childcare, the Personal Allowance taper (the 60% tax trap) and the Child Benefit charge. It's worked out for each person separately.

Start with your taxable income

• Salary and bonuses, after any salary sacrifice
• Taxable benefits, such as private medical insurance or a company car
• Savings interest and dividends
• Other taxable income, such as self-employment or rent

Then take off

• Pension contributions taken from pay before tax (net pay)
• Personal pension contributions, grossed up: what you pay plus 25%
• Gift Aid donations, grossed up the same way
• Trading losses, if you have them

An example

A parent earns £105,000, gets £1,000 of bank interest and pays £4,000 into a personal pension. The pension counts as £5,000 gross, so adjusted net income is £105,000 + £1,000 − £5,000 = £101,000. That's still over £100,000, so the family would lose funded hours and Tax-Free Childcare. Paying in another £800 (£1,000 gross) would bring it to £100,000.

Hundred Line does this sum for each parent, for each tax year, and finds the contribution that keeps you at or under your target.

Sources

• Adjusted net income (GOV.UK)

Checked 31 October 2026 for England. This guide is general information, not financial advice.