A £100,000 income figure is easy to treat as just another tax band. In practice, adjusted net income around this level deserves an earlier review because the standard Personal Allowance starts to be withdrawn. For the 2026–27 tax year, the Personal Allowance is £12,570 and HMRC reduces it by £1 for every £2 of adjusted net income above £100,000.
That means the important number is not necessarily the salary on your payslip, the dividends you drew from your company or the profit shown by one business. HMRC uses adjusted net income, which starts with your taxable income from a range of sources and then makes specific adjustments for reliefs such as eligible Gift Aid and pension contributions.
What counts towards adjusted net income?
HMRC's guidance starts by adding taxable income. Depending on your circumstances, that can include employment income and taxable benefits, self-employment profits, most pension income, savings interest, dividends, some rental income, trust income and foreign income. The calculation is therefore especially important for people who combine salary, dividends, property income or investment income.
After arriving at net income, HMRC allows certain adjustments. Eligible Gift Aid donations are deducted at their grossed-up amount. Qualifying private pension contributions where basic-rate relief has already been added are also grossed up when calculating adjusted net income. Other reliefs can apply in specific cases, so use your own records rather than assuming a single deduction applies to everyone.
Why the Personal Allowance creates a sharp planning point
For 2026–27, the standard Personal Allowance remains £12,570. Above £100,000 of adjusted net income it is withdrawn at £1 for every £2 of excess income. By £125,140 the allowance is reduced to zero. This interaction means the tax effect of extra income in this range can be materially different from simply applying the headline higher-rate percentage.
| Adjusted net income | Personal Allowance position |
|---|---|
| £100,000 or less | Standard allowance can remain available, subject to the normal rules. |
| £110,000 | £5,000 of the allowance is withdrawn under the £1-for-£2 rule. |
| £125,140 | The £12,570 standard Personal Allowance is fully withdrawn. |
| Above £125,140 | No standard Personal Allowance remains. |
Pensions and Gift Aid can change the ANI calculation — but check the rules first
Because qualifying pension contributions and Gift Aid can reduce adjusted net income, they can be relevant when you are close to £100,000. That does not mean making a contribution is automatically the right answer. Pension annual-allowance rules, cash-flow needs, investment suitability and the exact way a contribution receives tax relief all matter. Use the HMRC method and take regulated financial advice where appropriate.
The same discipline applies to Gift Aid. HMRC uses the grossed-up value of qualifying donations when calculating adjusted net income. Keep evidence of the donation and make sure the Gift Aid conditions are met before relying on it in a tax calculation.
The £100,000 figure can affect childcare support too
The threshold also appears in childcare rules. GOV.UK says you cannot claim Tax-Free Childcare if you or your partner expect adjusted net income of more than £100,000 for the current tax year. Free Childcare for Working Parents also uses a £100,000 adjusted-net-income ceiling for each parent. For families near the limit, an unexpected bonus, dividend or investment-income change can therefore have consequences beyond the Personal Allowance.
Do not confuse this with the High Income Child Benefit Charge. That charge uses adjusted net income too, but for 2026–27 its threshold starts above £60,000 and reaches full clawback by £80,000. It is a separate rule with a different threshold.
A practical check before 5 April 2027
- List every taxable income source you expect for 2026–27, not just salary or sole-trader profit.
- Add likely dividends, savings interest, rental income, taxable employment benefits and other relevant income.
- Record qualifying pension contributions and Gift Aid using the HMRC adjusted-net-income method rather than subtracting the cash amount blindly.
- Recalculate after bonuses, dividends or large one-off income events instead of waiting until the Self Assessment deadline.
- If childcare support or Child Benefit is relevant, check those rules separately because the thresholds and consequences are different.
- Keep the calculation and supporting evidence with your year-end tax records so your accountant can review the assumptions.
Turn the threshold into a plan, not a January surprise
The useful habit is to treat adjusted net income as a live planning figure. If you have several income sources, update the estimate as the year progresses and keep the evidence behind it. That makes it easier to understand whether you are moving through the £100,000 Personal Allowance threshold and gives you time to discuss legitimate planning options before the tax year closes.
Cherry Money can help keep the underlying bookkeeping organised across invoices, expenses and bank activity, while Cherry Tax can bring those records into a tax-focused view. The tax treatment still depends on your circumstances, so use HMRC guidance and professional advice for decisions with material tax or pension consequences.
Sources and further reading
- Personal Allowances: adjusted net income — HM Revenue & Customs / GOV.UK
- Income Tax rates and Personal Allowances — HM Revenue & Customs / GOV.UK
- Tax-Free Childcare: Check if you're eligible — GOV.UK
- Free Childcare for Working Parents: Check if you're eligible — GOV.UK
- High Income Child Benefit Charge — HM Revenue & Customs / GOV.UK
- Pexels licence — Pexels
Cherry Money
Know your income position before the tax year closes.
Use Cherry Money to keep income and expense records organised throughout the year, then review your tax position before 5 April rather than reconstructing it at the deadline.
Article feedback
Was this article helpful?
Your answer helps the Cherry Money Editorial Team improve future articles.
