Calculating adjusted net income with sacrifice

louisek12345

Hi All

i am really sorry for asking this question again but I have searched and read lots of posts on this but am completely confused on how this is calculated. 

I am trying to calculate my adjusted net income to determine if I qualify for the 30 hours of free childcare. Details are as follows

Basic salary: £72,000 per year (before salary sacrifice to pension)
Bonuses: £30,000 total/year
BIK: £10,000/year

I sacrifice £1000/month (£12000/year) of my salary to my pension (shown on my payslip as “pension sacrifice”). Gross pay shows as £5000 on payslip.

I also sacrifice all of my bonuses (total £30,000) to my pension (shown on my payslip as bonus in a positive amount and then “pension sacrifice” in a negative amount)

Can anyone please help me work out what my adjusted net income is for the year please? Thank you all for your help

Jeremy535897

My understanding is that your adjusted net income in this situation is £70,000 (salary, bonus plus benefits less salary/bonus sacrifice).

louisek12345

Thanks Jeremy. I thought that too but then got myself in a complete tangle over whether I could or could not take off the amount I had sacrificed to my pension. 

KingOfSnake

Just be careful on the pension annual allowance especially if your employer is making/matching contibutions - only £40K this year and by the sounds of it (£30K + £12K + employer?) you need to think carefully to avoid a back-door tax bill. You can carry forward unused allowance - speak to pension/ tax specialist if necessary as the charge is quite penal (google search pension annual allowance is a good starting point).

louisek12345

Thanks for pointing this out KingOfSnake - I hadn’t realised this. I didn’t contribute £40K to my pension in the previous 3 tax years so I think I can use the carry over concept. Do I need to tell HMRC about using my allowance from the previous years?