Pension contributions do not reduce adjusted net income (ITA 2007 s. 58), so the personal allowance taper and HICBC ignore them #2243

What happens

adjusted_net_income sums the taxable income components (adjusted_net_income_components) but does not deduct relieved pension contributions. pension_contributions_relief is applied later, as part of allowances. So the personal allowance taper (personal_allowance) and the High Income Child Benefit Charge, which both read adjusted net income, ignore pension contributions.

The law

ITA 2007 s. 58: adjusted net income is net income (s. 23 Step 2, after reliefs including FA 2004 s. 194(1) relief on claim, with net-pay contributions already out of employment income under FA 2004 s. 193), less the grossed-up Gift Aid, less the gross amount of relief-at-source contributions (FA 2004 s. 192(1)).

Reproducer (main at e89b8ab, and #2240's branch)

One adult, £150,000 employment income, £60,000 personal pension contributions, London, 2024: adjusted_net_income is £150,000 and personal_allowance is £0. Adjusted net income should be £90,000, so the full £12,570 allowance applies: income tax £23,432, not £28,460.

Fix

Deduct relieved contributions in adjusted net income (and so in the personal allowance taper and HICBC), while keeping them out of the base the rate bands apply to only once. Check the interaction with received_allowances_*, property_income_tax, capital_gains_tax (basic rate band extension) and the annual allowance taper. Add a property test: raising relieved contributions never lowers the personal allowance.

Found while fixing #2237 (#2240), which is separate: that PR removes the double tax on contributions above the annual allowance.