Simon has employed income of £240,000 and rental income of £24,000 this tax year. So, his total taxable earnings are £264,000.
To calculate his threshold income, take his taxable income of £264,000 and deduct a pension contribution he made to a GPP of £15,000.
Simon's threshold income is £264,000 minus £15,000 which equals £249,000. As Simon's threshold income is over £200,000 his adjusted income needs to be calculated.
To calculate his adjusted income, take his taxable income of £264,000, add in his employer's GPP contribution of £30,000. His adjusted income is £264,000 plus £30,000 which equals £294,000.
Simon's annual allowance is reduced by £294,000 minus £240,000 divided by 2 which equals £27,000. His annual allowance is therefore £40,000 minus £27,000 which equals £13,000.
He faces an annual allowance tax charge on £32,000 (£30,000 + £15,000 - £13,000) unless he has unused annual allowance to carry forward from previous years.