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Where Taxpayers and Advisers Meet

Adjusted net income

JTrayner
Posts: 2
Joined: Fri Jun 03, 2016 12:13 pm

Adjusted net income

Postby JTrayner » Fri Jun 03, 2016 12:24 pm

If you Google "adjusted net income" it will take you to the Gov.Uk website with a very clear explanation of how to calculate ANI. However, I'm not sure the explanation is correct.

It states you can take off any tax reliefs and these include the Personal Savings Allowance and the Dividend Allowance if you've received any dividends. However none of the examples they give include these items nor does the Child Benefit Calculator include them.

Moreover to calculate an individual's PSA you need to establish their ANI but according to the site you have to deduct the PSA but how would you know how much to deduct?

Very confused! Can someone help?

Lambs
Posts: 1478
Joined: Wed Aug 06, 2008 3:15 pm

Re: Adjusted net income

Postby Lambs » Fri Jun 10, 2016 12:47 pm

Dear J,

If you mean the guidance at

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

then I think you are right to be confused.

I would need to check to the draft legislation but I am very surprised to see the following in HMRC's guidance:

Step 1 - work out your ‘net income’

Add up your taxable income.

Include things like:
•money you earn from employment (including any benefits you get from your job)
•profits you make if you’re self-employed including from services you sell through websites or apps
•some state benefits
•most pensions (including the State Pension, company and personal pensions and retirement annuities )
•interest on savings and pensioners bonds
•dividends from company shares
•some rental income
•income from a trust

Take off any tax reliefs that apply like:
•payments made gross to pension schemes - those that have been made without tax relief
•trading losses, for example trade loss relief or property loss relief
*****• personal savings allowance if you have savings interest and you are not an additional rate tax payer*****
*****•dividends allowance for part of your income if you are paid dividends*****

Definitely warrants further investigation. These so-called "allowances" are in fact simply applying a nil rate of tax to (basically) the first portion of appropriate income. The are NOT allowances in the way that tax people think of allowances and they do NOT reduce income.

Regards,

Lambs

Lambs
Posts: 1478
Joined: Wed Aug 06, 2008 3:15 pm

Re: Adjusted net income

Postby Lambs » Fri Jun 24, 2016 12:28 am

Dear J,

I am pleased to advise that HMRC have written to confirm, as follows:

"You are correct - the Personal Savings Allowance and dividend allowance are 0% rate bands chargeable on specific types of income (savings and dividends), they have no effect on a person's Adjusted Net Income."

I trust this is useful - although it does rather beg the question: how can HMRC's guidance be so wrong?

Kind regards,

Lambs


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