Adjusted net income and tax free childcare

[Deleted User]

eyalmms said:

Or is that saying pension contributions aren't included, rather than pension contributions can't be deducted!!

VERY misleading! Aren’t included is correct. As in ‘not included as income’ Trading losses, for example, definitely reduce ANI. 

[Deleted User]

THIS is a better explanation from HMRC:

https://www.gov.uk/guidance/adjusted-net-income

eyalmms

Now I'm more confused!! That says to add up

• money you earn from employment (including any benefits you get from your job)... and
• most pensions (including the State Pension, company and personal pensions and retirement annuities )

And then to deduct payments made gross to pension schemes - (those that have been made without tax relief)

How is someone clueless in tax (like me) supposed to know where I'm adding my pension or taking it away?! I have no idea if my pension contributions are made without tax relief or not

Happy to take your word for it but they don't half make it confusing! Just hope the next person I phone agrees with me...

E

[Deleted User]

eyalmms said:

Now I'm more confused!! That says to add up

• money you earn from employment (including any benefits you get from your job)... and
• most pensions (including the State Pension, company and personal pensions and retirement annuities )

And then to deduct payments made gross to pension schemes - (those that have been made without tax relief)

How is someone clueless in tax (like me) supposed to know where I'm adding my pension or taking it away?! I have no idea if my pension contributions are made without tax relief or not

Happy to take your word for it but they don't half make it confusing! Just hope the next person I phone agrees with me...

E

This is from that same page at the top:

What adjusted net income is

Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs, for example:

• trading losses
• donations made to charities through Gift Aid - take off the ‘grossed-up’ amount
• pension contributions paid gross (before tax relief)
• pension contributions where your pension provider has already given you tax relief at the basic rate - take off the ‘grossed-up’ amount

The thing that you need to understand is that your total TAXABLE income is AFTER NHS pension contributions - as designated on your payslip. So - applying that to the first line:

Adjusted net income is total TAXABLE  income :

you have your starting point. 

eyalmms

Really can't tell you how grateful I am. And how much of a shame it was that I didn't ask on Friday instead of trying to find the extra money for nursery!!
Thank you

E

Jeremy535897

"Does not include" is poor English. So is "capital gains earnings". As you would never treat capital gains as income, clearly these items do not add to adjusted net income. But some clearly reduce it, like trading losses set sideways, grossed up gift aid contributions, and pension contributions made by the employee. Remember that in salary sacrifice arrangements, the employer makes the contributions. You are already taxed only on the salary as reduced by the sacrifice, so you can't deduct the payments actually made by the employer.

[Deleted User]

It’s very poor wording and could genuinely form the opinion that one isn’t entitled to claim when one is.