Jargon buster
- Adjusted net income
- Anti-forestalling
- Irregular pension contributions
- Personal allowance
- Relevant income
- Relevant mean
- Salary sacrifice
Adjusted net income
Adjusted net income is a measure of a person's income used to calculate the age-related levels of personal allowance and married couple's allowance. From 6 April 2010 it will be used to calculate the level of personal allowance for anyone with income in excess of £100,000.
Adjusted net income is calculated as follows:
- Stage 1 - Start with net income, which is total income less deductions (for example job expenses, professional subscriptions, losses and loan interest).
- Stage 2 - Deduct gross gift aid (the total amount paid to a UK charity in a tax year grossed up by the amount of income tax you pay).
- Stage 3 - Deduct grossed up pension contributions paid under relief at source arrangements.
Anti-forestalling
Anti-forestalling provisions were announced in the 2009 Budget as a means of preventing taxpayers from making artificially large pension contributions prior to 6 April 2011 in order to benefit from relief at 40% (or 50% from April 2010). These rules take effect from 22 April 2009 for those:
- whose 'relevant income' is £150,000 or higher in the current or previous two tax years, and
- who change their normal ongoing regular pension savings, and
- whose total pension savings exceed £20,000 per annum.
Irregular pension contributions
Contributions paid less frequently than quarterly, for example contributions paid singly, half-yearly or yearly.
Personal allowance
The level of income you can receive each year without having to pay tax on it.
Relevant income
This includes total income from all sources, not just earnings. This income would be calculated after normal deductions and reliefs, eg trading losses, pension contributions up to a maximum of £20,000, and gift aid. Other examples could include investment income, rental income and pension income.
Relevant mean
The average of any 'irregular pension contributions' made in the three tax years from 2006/7 to 2008/9.
Salary sacrifice
A tax-efficient way of increasing the money paid into a pension scheme by giving up existing salary or proposed salary increases, so that the sum forgone can be used as an additional company contribution into a pension scheme.
The information in this section is based on our understanding, as at October 2009, of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice. The impact of taxation (and any tax reliefs) depends on individual circumstances. The extent that these changes will impact on an individual will be dependent upon his/her personal tax position.
