Pension / taxable salary question

andrewm1981

Hi,

Think I'm right I'm what I'm saying, but I just wanted to check.

I earn £43k a year roughly through my full time job at tesco, and pay 5% into my pension which is the standard amount.

I'm thinking about buying a buy-to let property, which would return me approximately £1000/month (after non-taxable reductions) . As my normal salary tips me just into the 40% tax bracket, I would have to pay 40% tax on my buy to let income.

If I was to contribute £1000/month into AVCs through them automatically deducting it from my pay at work, would my "pay" essentially reduce to around £31k/years meaning that I could pay just 20% income tax on my buy-let-let income as a lower rate tax payer?

Thanks in advance!

Andrew

Linton

andrewm1981 wrote: »

Hi,

Think I'm right I'm what I'm saying, but I just wanted to check.

I earn £43k a year roughly through my full time job at tesco, and pay 5% into my pension which is the standard amount.

I'm thinking about buying a buy-to let property, which would return me approximately £1000/month (after non-taxable reductions) . As my normal salary tips me just into the 40% tax bracket, I would have to pay 40% tax on my buy to let income.

If I was to contribute £1000/month into AVCs through them automatically deducting it from my pay at work, would my "pay" essentially reduce to around £31k/years meaning that I could pay just 20% income tax on my buy-let-let income as a lower rate tax payer?

Thanks in advance!

Andrew

Yes.

Whether the Tesco AVC is the best place to put your pension is something you would need to investigate. Another option is a Personal Pension completely separate from your Tesco one.

kidmugsy

There's talk in today's paper of Tesco closing their Defined Benefit pension scheme. If the AVCs can buy you more DB pension, maybe it's a good time to contribute before the option vanishes. But there are arguments against piling into DB schemes if you were then to leave such a scheme while still young. I imagine you'd want to read the T&Cs carefully.

andrewm1981

Thanks for your replies,

I'm already part of the DB scheme so the news won't affect me, and the extra AVCs are separate and are through standard life using a better management rate (0.55% I think) I'm 33.

I'd rather have money going to my pension than the taxman so it seems sensible to start the AVC ball rolling?!