Adjusted Net Income and the 60 Percent Tax Trap for Doctors

Adjusted net income is the figure HMRC tests against £100,000, and it is not the taxable pay printed on your payslip. Between £100,000 and £125,140 in 2026/27 the £12,570 personal allowance is withdrawn at £1 for every £2 of income, so an extra £2 of earnings carries £1.20 of tax. That is an effective 60 percent. Grossed-up Gift Aid donations and grossed-up personal pension contributions are the two deductions that bring the tested figure back down.

What Is My Adjusted Net Income, and Where Do I Find It?

No box on a P60 or a payslip gives you the answer. Adjusted net income is a computation set out in ITA 2007 s.58, and HMRC's guidance builds it in four steps.

• Start with net income for the tax year: all taxable income from every source, less reliefs already given.
• Take off grossed-up Gift Aid donations, £1.25 for every £1 given.
• Take off grossed-up personal pension contributions given basic-rate relief by the provider, again £1.25 per £1.
• Add back any relief taken for trade union or police organisation payments.

Step one is where doctors lose track of the number. It gathers your NHS pay, additional sessions, waiting list initiative payments, private practice profit, a GP partner's profit share, rental profit, savings interest and dividends into one figure. Say your P60 shows £98,000 and your private clinic made £9,000. Your adjusted net income is then near £107,000, and your allowance has already begun to go.

Employment expenses reduce net income at step one and so reduce this figure too, and the flat-rate laundry allowance and subscription relief are covered in the guide to NHS uniform tax relief and the laundry allowance.

What is your effective marginal tax rate in 2026/27, band by band?

Income tax rates and the effect of the personal allowance taper, 2026/27, England, Wales and Northern Ireland. National Insurance is not included.

Adjusted net income	Income tax rate on the band	Effective rate on the next £1
Up to £12,570	Nil	0%
£12,571 to £50,270	20%	20%
£50,271 to £100,000	40%	40%
£100,001 to £125,140	40%	60%
Above £125,140	45%	45%

The personal allowance is reserved to Westminster, so the adjusted net income test at £100,000 is UK-wide and applies in all four nations. National Insurance sits on top of these figures: for self-employed private practice profit in 2026/27, Class 4 runs at 6 percent between £12,570 and £50,270 and 2 percent above.

Why the 60 Percent Tax Trap Hits Doctors Without Warning

Once adjusted net income passes £100,000, the £12,570 personal allowance falls by £1 for every £2 above that line. It is exhausted at £125,140, because £100,000 plus twice £12,570 is £125,140. Inside the band you pay 40 percent on the extra income and 40 percent again on the allowance it has just removed, which is £1.20 of tax on every £2.

Take a hospital consultant, Dr K, whose NHS taxable pay for 2026/27 is £104,000 after pension contributions, and who takes on £6,000 of private clinic profit during the year. The whole £6,000 falls inside the taper band. Income tax at 40 percent on £6,000 is £2,400. That income also removes a further £3,000 of personal allowance, and the £3,000 is then taxed at 40 percent, adding £1,200. Class 4 National Insurance adds nothing here, because it is charged on trading profits alone rather than on employment income, and £6,000 of profit sits below the £12,570 lower profits limit. Tax on the £6,000 comes to £3,600, so £2,400 of it reaches the bank, an effective rate of 60 percent. A gross personal pension contribution of £6,000 would bring adjusted net income back to £104,000 and restore the £3,000 of allowance. The figures are illustrative and rounded.

How Is Adjusted Net Income Different from Adjusted Income?

Adjusted net income and adjusted income are two different statutory measures with confusingly similar names, and doctors meet both. This page is about adjusted net income, defined by ITA 2007 s.58, which drives the personal allowance withdrawal and the High Income Child Benefit Charge. The other one, adjusted income under FA 2004 s.228ZA, is not adjusted net income under a longer name and is built from different components.

That second measure governs a separate taper, which reduces how much your NHS pension can grow in a year before a tax charge arises, and it is worked through on the NHS pension annual allowance calculator. The two will rarely be the same number, so neither can be read off the other.

Do NHS Pension Contributions Reduce Your Adjusted Net Income?

They do, but through the mechanism rather than through a deduction you claim. NHS Pension Scheme contributions are taken out of your pay before income tax is calculated, which is why the taxable pay on your P60 is already net of them. They have therefore reduced net income at step one, and nothing is left to take off at step three, which covers only schemes where the provider claims basic-rate relief for you.

The consequence catches people out: if you are already in the scheme, you cannot use those contributions again to climb back below £100,000. The lever that still moves your figure is a further personal pension or SIPP contribution, or a Gift Aid donation.

What pushes doctors over £100,000 without them choosing it?

General guidance here assumes a decision: take the bonus, accept the dividend, buy the rental. A doctor's crossing point often arrives without one.

• Waiting list initiative payments agreed at short notice to clear a backlog.
• Extra programmed activities, on-call and out-of-hours work added to a job plan.
• A backdated pay award landing in one month for two years of service.
• A GP partner's profit share, agreed after the practice year end and able to move a partner across the line retrospectively.
• Private practice growing faster than expected in its second or third year.

All of it stacks on top of your existing income, so you pay tax at marginal rate on every pound of it, and here that rate is 60 percent rather than 40. A modest pay rise or one extra session can deliver under half of what it appears to pay.

How to Avoid the 60 Tax Trap Before 5 April

While the tax year is still running you have four levers, and each of them reduces the tested figure rather than the rates.

A gross personal pension contribution reduces adjusted net income pound for pound, so £6,000 contributed at £110,000 restores £3,000 of allowance. A Gift Aid donation does the same at £1.25 for every £1 given. Timing is the third: an invoice raised in April rather than March falls into the next year, though only where the facts genuinely support the date. The fourth is the honest one, declining or deferring extra sessions, because 60 percent is a real price.

A further pair of routes belongs elsewhere. Income is taxed on the figure of whichever spouse receives it, so how a couple hold jointly owned assets affects whose adjusted net income it lands in. Holding substantial private income in a company changes when profit is taxed on you personally, and that trade-off is set out in the guide to private practice incorporation. Both are questions for a regulated adviser.

The Levers That Still Work After 5 April, and the Ones That Do Not

Almost every article on this subject stops at 5 April. That is no help if you find out in July that a profit share pushed you over in the year that has already ended. Two levers have closed by then and one has not.

A pension contribution has to be paid in the tax year it is set against, so it cannot repair a year that has ended, and income timing has closed for the same reason. Gift Aid is the exception. ITA 2007 s.426 lets you elect to treat a donation as made in the previous tax year. The election has to be made on or before the date you deliver that year's return and no later than the 31 January filing date, and you must have paid enough tax in the earlier year to cover it. If you are filing in January on a £101,500 figure, that carry-back is the only lever you have left.

How the 100k Tax Trap Childcare Cliff Works

Tax-Free Childcare and the funded childcare hours in England both stop if you or your partner expect adjusted net income over £100,000 for the current tax year. Tax-Free Childcare adds £2 for every £8 you pay in, capped at £500 a quarter, or £2,000 a year for each child, and £1,000 a quarter where the child is disabled. The funded hours run to 30 hours a week for 38 weeks of the year, for children aged nine months to four years.

It is a cliff, not a taper. A parent of two children using the full top-up loses £4,000 a year by going £1 over. That sits on top of the 60 percent already charged in the band, and the loss falls on your whole household even though only one parent crossed the line.

What Happens to Child Benefit at the Same Time?

Child Benefit is clawed back through the High Income Child Benefit Charge, assessed on the adjusted net income of the higher earner in the household. For tax years from 2024/25 it begins once that figure exceeds £60,000 and repays 1 percent of the Child Benefit received for every £200 above the threshold, so the whole of it has been repaid by £80,000.

So the same measure can catch you twice on the way up a career: the Child Benefit charge between £60,000 and £80,000, then the allowance taper from £100,000. Anything that reduces adjusted net income works on both, which is why the figure is worth calculating once a year rather than meeting it on a return.

If you want your adjusted net income calculated before 5 April rather than after it, our services for doctors and GP partners cover the year-end review, the pension and Gift Aid position and self-assessment. Get in touch to arrange a call.

Related Reading

• Private Practice Tax: Managing NHS and Private Income
• Private Practice Incorporation: The Complete Guide
• NHS Uniform Tax Relief and the Laundry Allowance