tax on rental income

00ec25

if you are borderline HR and determined to stay below then why not increase the company's contributions to your pension fund and then there'd be less profit for distribution anyway

begbeer

At the moment we have a personal stakeholder pension each paying in £300 a month, this is done from our earned income after tax have asked out accountant if it would be more tax efficeint to do so though the company but they said not are they wrong?

theartfullodger

begbeer wrote: »

Can assure everyone that it is all above board, we employ an accountant who does our self assesement forms each year and includes all comings and goings as regards our rented property, if you read my first post you will see that we purchased this house so my mother of then 77 would not be homeless after being promised the house for life. We have up to now being subsidising it but with our fixed rate finished our interest only mortgage payments will be less than the rent she pays us (the same rate she paid to the farmer)

Apologies if I'd misunderstood: But on that basis he (accountant) can tell you how much accumulated losses he's got recorded with HMRC to offset against future property earnings. See what he says - you'll hopefully still pay nowt in 11/12...! [My accountant used to forget to transfer the amount forward onto the next year: Eventually I ended up doing the return myself, it would have cost me way too much if I'd let him stick in his numbers without checking first...]

phlash

begbeer wrote: »

At the moment we have a personal stakeholder pension each paying in £300 a month, this is done from our earned income after tax have asked out accountant if it would be more tax efficeint to do so though the company but they said not are they wrong?

True, assuming you have enough salary to claim pension tax relief, since you cannot claim more than your salary - watch for that. In the case where you have a low salary and high dividends, this is something to check.

It is only true because company corporation tax = 20% and lower rate income tax = 20%. The case where CT > IT it is better for your company to pay.

Less for your accountant to do if your company pays, its simply a deduction in the accounts rather than it flowing out as a dividend and pension tax relief claimed on tax return.

phlash

NB. For the post above, for a higher rate tax payer who has other dividend income in excess of the pension income (rare example, but not unheard of), the higher rate tax relief on the pension is in excess of the higher rate tax on the dividend. All assuming a like for like amount ends up in the pension pot.

However, although you may save a few pennies, you lose out because your tax credit into your pension pot from the Government is delayed. So, on balance, it is arguably still better to get the COmpany to pay.