Rental income pushing me into higher rate tax

kirsteen0603

Hi, looking for advice please. 

I recently got a salary increase which along with a property rental income pushes me into the 40% tax bracket. 

My salary is just under the 40% line excluding rental income. Can I claim pension tax relief at 40% given I’m being pushed into the higher bracket overall? Or is it a mute point given rental income is seen as ‘unearned’. 

Thank you

lisyloo

Rental income is not “relevant” for pension tax relief purposes as far as I can see

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/

however I think you can put more of your earned income into your pension which would effectively push up the 40% line/threshold and then I’d expect you to be under the threshold. 

You may may know better how the two are calculated on self assessment?

Dazed_and_C0nfused

Can I claim pension tax relief at 40% given I’m being pushed into the higher bracket overall?

You don't claim a specific amount when completing your Self Assessment return.

Assuming you are referring to "relief at source" contributions that you are eligible to pay by virtue of your employment income then you will get 25% added by the pension company i.e. you contribute say £4,000 and this becomes £5,000 with the basic rate tax relief added.

You include the gross contribution (say £5,000) on your Self Assessment return and this increases your basic rate band by the amount of the gross contribution (so £42,700 instead of £37,700 in this example).

This means more income can be taxed at 20% and less at 40%.