Can having buy to let properties, affect your future state pension ? (inland revenue)

Galeeno

If somebody is now working, and have 5 more years to get to state pension age and retire..


If you have a few properties bought and rented, (buy to let mortgages)

and you will be in your state pension year in 5 years time, and retired from work then (now are currently working)

then can these buy to let properties, which are rented, affect your state pension amount/rate, (through / via the inland revenue/tax code?)

(as buy to let properties are seen to be a way to make an additional income. ie making money)


Would this affect the state pension amount , at the state pension age?

How would it affect the state pension ?
-added: Even through Tax? (as the rental income would be taxable)

If affected through tax, how would it affect tax?

and what would be the tax ££ thresholds, that would ensure that the amount of pension weekly would NOT be affected ? ??

Is there any way around it?, like to reduce tax..

The properties in the buy to let are in the name of the person who will be in the state pension (deeds and mortgage, as in their name), so just asking how the state pension would be affected, due to these additional incomes..

Has this happened to you? share your experience.

CLAPTON

the state pension has nothing to do with other income and is paid based on your NI history

the current system of pension credits of other means tested benefits for poor people would be affected by other income of course

tax is based on your total taxable income which would include state pension, other pensions, rental income, dividend income, savings interest (unless sheltered in ISAs)

dunstonh

The only way it can impact is tax. The state pension is paid gross but is taxable. Your rental income is paid gross but is taxable. So, you will have an annual tax return to complete and will need to pay your tax on a yearly or half yearly basis (depending on how you structure the property ownership).

Galeeno

dunstonh wrote: »

The only way it can impact is tax. The state pension is paid gross but is taxable. Your rental income is paid gross but is taxable. So, you will have an annual tax return to complete and will need to pay your tax on a yearly or half yearly basis (depending on how you structure the property ownership).

Even through Tax? (as the rental income would be taxable)

If affected through tax, how would it affect tax?

and what would be the tax ££ thresholds, that would ensure that the amount of pension weekly would NOT be affected ? ??

xylophone

In five years time the person retires.
If income earned whether through state pension, occupational/private pension, rental, non-isa savings, dividends etc is over that allowance then he will pay tax at the prevailing rate for his circumstances.

dunstonh

Even through Tax? (as the rental income would be taxable)

If affected through tax, how would it affect tax?

You can earn £10k a year without tax. Both the state pension and rental income are taxable. So, above the £10k personal allowance, tax will be due. However, neither can deduct tax at source. So, savings would need to be put aside to cover that annual/half yearly tax bill. If income was below the personal allowance then no tax would be payable.

Not all investments are taxable. So, it is possible with advanced planning to reduce or even potentially avoid tax.

Also, the gross figure on the pension is unaffected. It is only the net tax position that may apply.

Galeeno

dunstonh wrote: »

Not all investments are taxable. So, it is possible with advanced planning to reduce or even potentially avoid tax.

Thanks.

What type of steps/planning/ procedure, to reduce/avoid tax?

dunstonh

What type of steps/planning/ procedure, to reduce/avoid tax?

Utilising tax wrappers on conventional investments, splitting money between couples to use both allowances. Making sure you max out free money from employer when its a available (tax on income from money you never paid yourself is never a problem!)

mania112

Good question and the answer isn't as simple as it may seem at first glance.

atush

If The Somebody who owns the properties is married, splitting ownership with a spouse can mean the rental income is shared between two people, possibly lowering tax.

The Somebody could make sure they had no savings/investment income subject to tax by putting all assets in ISAs over the years coming. Again if a spouse, twice the money can be sheltered.