Tax relief on pensions

BobQ

Can someone clarify for me......

When you contribute to a personal pension I appreciate you can claim tax relief on these contributions if you are a HRT payer. Does this apply just to earned income? Say you had paid an amount of CGT that year from selling a house, would you be able to claim against the 28%?

booksurr

No, pension tax relief is a relief on relevant earnings subject to income tax, you paid CGT not income tax, so cannot recover the tax on the gain from selling your property
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm05200060.htm

purdyoaten

booksurr wrote: »

No, pension tax relief is a relief on relevant earnings subject to income tax, you paid CGT not income tax, so cannot recover the tax on the gain from selling your property
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm05200060.htm

Yes - but presumably the op would have paid 28% as this brought him/her above the higher rate threshold - i.e. would have been basic rate otherwise. (Could be wrong but that appears to be the case - otherwise you are, of course, absolutely correct))

If so, would the basic rate band not be extended by the gross pension contribution thereby reducing the amount payable at 28%? I appreciate that this only grants an extra 10% relief but the point remains.

BobQ

purdyoaten wrote: »

Yes - but presumably the op would have paid 28% as this brought him/her above the higher rate threshold - i.e. would have been basic rate otherwise. (Could be wrong but that appears to be the case - otherwise you are, of course, absolutely correct))

If so, would the basic rate band not be extended by the gross pension contribution thereby reducing the amount payable at 28%? I appreciate that this only grants an extra 10% relief but the point remains.

It is not for me, I am asking out of curiosity after an acquaintance assured me it was possible. He said it would be more tax efficient to sell one of his two BTLs before he retires as it would mean he could maximise his personal pension contributions, I would have thought it was better to sell after he retires when he would pay less CGT. But the link above seems to make it clear that you cannot use the CGT as if it were income in any case.

Your_Hero

BobQ wrote: »

Can someone clarify for me......

When you contribute to a personal pension I appreciate you can claim tax relief on these contributions if you are a HRT payer. Does this apply just to earned income? Say you had paid an amount of CGT that year from selling a house, would you be able to claim against the 28%?

You won't be able to "claim against" the 28% as such. A pension contribution would effectively increase the HRT threshold and so more of his income falls under as BRT.

Remember the gain from the house sale is then added to your income for that year. This means that some or all of the gain could be just taxed at 18% instead of the full 28%.