Think you're paying the right amount of tax? Think again.

Every year, thousands of UK workers pay more tax than they need to, and most of them don’t even realise it. One of the biggest reasons? They don’t know what ‘adjusted net income’ means or how it affects their pay.

Here’s the thing: understanding this one tax term could help you save hundreds or even thousands of pounds. Whether you're just starting out in your career or juggling multiple jobs, adjusted net income plays a big role in how much tax you actually owe.

So let’s break it down in plain English. No confusing jargon, no tax waffle – just the info you need to keep more of your hard-earned money where it belongs.

What it actually means (and why it matters)

There’s a big difference between your gross income vs adjusted net income – and it matters more than you think. Adjusted net income is your total taxable income after certain deductions – like pension contributions or charitable donations – but before you take off your Personal Allowance.

In plain terms, it’s what HMRC looks at to decide how much tax you should pay, and whether you’re still entitled to things like Child Benefit or tax-free personal allowances.

Why it matters

This isn’t just something for accountants or number-crunchers. If you’re working in the UK and earning money – even from more than one job or side hustle – your adjusted net income can affect:

Got more than one income stream or job? It’s easy to get put on the wrong tax code without realising – and that can cost you. Our guide to tax code explains how to check if yours is right.

Quick example

Say you earn £55,000 a year. Sounds straightforward, right? But if you’re also making pension contributions, claiming Gift Aid on donations, or have trading losses, those all reduce your adjusted net income. That could mean the difference between paying extra tax or keeping your full Personal Allowance.

How adjusted net income affects your tax

Once you know your adjusted net income, it changes the way your tax is worked out – sometimes in big ways.

HMRC uses this figure to decide how much of your income should be taxed and at what rate. It’s also used to check if you’re still eligible for certain benefits or allowances. So if your adjusted net income is too high, you could end up:

  • Paying back some (or all) of your Child Benefit
  • Losing part of your Personal Allowance
  • Paying a higher rate of tax on some of your income

Why it matters for young workers

You don’t need to be earning six figures for this to matter. Plenty of people get caught out when they:

  • Get a pay rise that tips them over a threshold
  • Start a second job or freelance on the side
  • Get company perks like a car or health insurance
  • Forget to deduct eligible expenses or reliefs

Real-world examples

  • Child Benefit charge: If your adjusted net income goes over £50,000, you might have to pay back some of your Child Benefit. Go over £60,000? You could lose it altogether.
  • Personal Allowance tapering: Earn more than £100,000 in adjusted net income? You start losing your tax-free Personal Allowance – and for every £2 you go over, you lose £1 of it.
  • Student loans: If you’re on a Plan 1 or Plan 2 loan, your repayments are based on your income. A higher adjusted net income means bigger repayments.

These rules apply to current UK tax thresholds 2025, which are subject to change. In short, even if your payslip looks good, your adjusted net income could mean you’re still overpaying tax without realising.

What counts towards your adjusted net income?

Adjusted net income isn’t just about your salary. It’s the full picture of what you earn, plus a few extras you might not think about, minus certain deductions.

Here’s a simple breakdown.

Income that gets added

HMRC includes all taxable income when working out your adjusted net income. That means:

  • Salary and wages – your main job and any side jobs
  • Self-employed income – including freelance or gig work
  • Rental income – if you let out a property
  • Interest from savings and investments
  • Dividends
  • Benefits in kind – things like company cars, private medical insurance or gym memberships provided by your employer

These all count before any Personal Allowances are applied.

Deductions that reduce it

The good news? You can reduce your adjusted net income by claiming certain deductions:

  • Gross pension contributions and tax relief - can bring your adjusted net income down
  • Gift Aid donations – if you’ve donated to charity and ticked the box to claim Gift Aid tax relief
  • Trading losses – from self-employment
  • Certain allowable expenses – especially if you’ve been working in a temporary location or paying out-of-pocket for tools, uniforms or travel

Understanding adjusted net income thresholds can help you avoid unexpected tax charges. Each of these can bring your adjusted net income down, which could save you serious money.

The hidden costs many workers miss

Most people don’t realise just how many of their everyday work costs could bring down their adjusted net income.

If you’re covering costs out of your own pocket just to do your job, there’s a good chance you’re due a refund. And if you’re not claiming those expenses, HMRC is keeping money that could be in your bank account.

Common work expenses that count

You might be able to claim tax relief on:

  • Work travel – including mileage, public transport, or overnight stays
  • Meals while travelling for work
  • Uniforms or protective clothing
  • Tools and equipment
  • Professional fees or subscriptions

These expenses directly lower your adjusted net income, which could help you:

  • Stay under the threshold for losing Child Benefit
  • Keep your full Personal Allowance
  • Pay less in Student Loan repayments

Why most people don’t claim

Too many workers miss out because:

  • They don’t know what counts as a claimable expense
  • They assume it’s too complicated to sort
  • They’ve never heard of adjusted net income, let alone how to lower it

But with RIFT on your side, it’s easier than you think.

How to calculate your adjusted net income

If you’re wondering how to calculate adjusted net income, here’s a step-by-step guide:

Step-by-step guide

  1. Start with your total taxable income
    This includes all income from jobs, self-employment, property, savings, dividends and benefits in kind.
  2. Add any extra taxable benefits
    For example, a company car or private health insurance.
  3. Deduct the following if they apply to you:
    • Gross pension contributions (those made before tax)
    • Gift Aid donations (use the ‘grossed-up’ amount – that’s your donation plus basic-rate tax)
    • Trading losses (if you’re self-employed)
    • Certain allowable expenses (like tools or travel for work)

The number you’re left with is your adjusted net income. That’s the figure HMRC uses to check what tax breaks you qualify for.

Free tools and resources

You don’t need to do it all manually. There are tools available online to help estimate your adjusted net income, including:

  • The GOV.UK income tax calculator
  • HMRC’s adjusted net income checker

Want to make sure you’re claiming everything you’re owed? Check out our full tax refund guide for your local area.

When to get expert help

If you’ve got multiple income sources, changed jobs recently, or aren’t sure what counts as a deduction, it’s a good idea to speak to a tax expert. Getting it wrong could cost you – but getting it right could mean a refund worth thousands.

Signs you've been overpaying tax

Overpaying tax isn’t rare, it’s actually surprisingly common. And because HMRC doesn’t always flag it, it’s up to you to spot the signs and do something about it.
Here’s what to look out for.

Red flags to watch for

You might have overpaid tax if:

  • You’ve changed jobs recently or had gaps between them
  • You’ve got more than one job at the same time
  • You’re on the wrong tax code (check your payslip!)
  • You’ve been paying for work expenses like travel or equipment out of pocket
  • You’ve had a sudden pay rise or bonus that pushed you into a new tax band

Why it happens

HMRC usually gets your tax right. But their system relies on having up-to-date info about your job, income and circumstances. If anything changes and they don’t know about it, you could end up paying too much.

It’s not just high earners either. Lots of people lose money every year because they don’t realise they’re entitled to claim back work-related expenses or adjust their tax code.

Don’t let HMRC keep your money

If your adjusted net income is higher than it should be, you could be losing out on tax breaks, allowances and cold hard cash. But here’s the good news: you might be owed up to £3,000 in tax refunds.

RIFT makes it easy to get back what’s yours. No stress, no complicated forms, no jargon.

Here's what to do next:

You won’t pay a penny upfront and we’ll handle everything for you. That’s tax refunds made easy.