tax advice.

activities

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

easy

No,  if the house is owned by you,  you can't put the income from it in your husband's name. 
You could defer taking your state pension,  get more in subsequent years if you defer now.

Dazed_and_C0nfused

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Are you Scottish resident?  If not you are actually just under the higher rate threshold at the moment.

But would potentially just go over it in 2025-26 given your State Pension will be ~£450 more and you could have a pay rise and inflation increase on your private pension.

Pension contributions would help avoid that.

Bookworm105

Dazed_and_C0nfused said:

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Pension contributions would help avoid that.

?
deferring the state pension would have a better outcome than paying into a pension considering the OP is already receiving a private pension in payment 

HappyHarry

Bookworm105 said:

Dazed_and_C0nfused said:

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Pension contributions would help avoid that.

?
deferring the state pension would have a better outcome than paying into a pension considering the OP is already receiving a private pension in payment 

I disagree - a lot more information would be required to reach that conclusion. In most situations making personal pension contributions to avoid higher rate tax would be preferable to deferring the state pension.

Bookworm105

HappyHarry said:

Bookworm105 said:

Dazed_and_C0nfused said:

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Pension contributions would help avoid that.

?
deferring the state pension would have a better outcome than paying into a pension considering the OP is already receiving a private pension in payment 

I disagree - a lot more information would be required to reach that conclusion. In most situations making personal pension contributions to avoid higher rate tax would be preferable to deferring the state pension.

OP will have 4 sources of income 
- employment £15,550 pa
- private pension £16,000 pa
- state pension £10,560 pa
total relevant earnings £42,110 from which (new)  pension contributions could be made 
- £6,000 rent which we assume is taxable profit net of property allowance, but is unearned income ineligible for pension contribution tax relief
total gross income £48,110 

HR tax threshold £50,270
OP is and will be a basic rate taxpayer.
OP's objective appears to be to avoid any income in the HR bracket. The amount of money exposed to 40% will be tiny and the extra 20% tax relief by potentially paying into a new pension will be negligible and probably offset by commission payable to an IFA for setting up the new pension. Deferring state pension is a valid option.

Dazed_and_C0nfused

Bookworm105 said:

HappyHarry said:

Bookworm105 said:

Dazed_and_C0nfused said:

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Pension contributions would help avoid that.

?
deferring the state pension would have a better outcome than paying into a pension considering the OP is already receiving a private pension in payment 

I disagree - a lot more information would be required to reach that conclusion. In most situations making personal pension contributions to avoid higher rate tax would be preferable to deferring the state pension.

OP will have 4 sources of income 
- employment £15,550 pa
- private pension £16,000 pa
- state pension £10,560 pa
total relevant earnings £42,110 from which (new)  pension contributions could be made 
- £6,000 rent which we assume is taxable profit net of property allowance, but is unearned income ineligible for pension contribution tax relief
total gross income £48,110 

HR tax threshold £50,270
OP is and will be a basic rate taxpayer.
OP's objective appears to be to avoid any income in the HR bracket. The amount of money exposed to 40% will be tiny and the extra 20% tax relief by potentially paying into a new pension will be negligible and probably offset by commission payable to an IFA for setting up the new pension. Deferring state pension is a valid option.

However I suspect they State Pension is, using current year rates, actually £11,440 not £10,560.

And although they can use the whole £48k to fund pension contributions only the earnings of £15,550 are qualifying earnings for pension contributions purposes.  So that will limit the amount they can contribute and receive tax relief on.  Which is of course more than sufficient for the scenario being discussed.

Deferring State Pension is definitely a valid option however the pay back time under the new State Pension deferral rules is so much less attractive than under the old rules I don't think there are nearly as many takers for it compared to pre 2016 State pensioners.

Grumpy_chap

Bookworm105 said:

OP will have 4 sources of income 
- employment £15,550 pa
- private pension £16,000 pa
- state pension £10,560 pa
total relevant earnings £42,110 from which (new)  pension contributions could be made 

I don't believe that to be correct.
I always understood that pension income is not within the definition of relevant earnings from which tax-relievable pension contributions can be made:
https://www.aegon.co.uk/adviser/knowledge-centre/technical-zone/what-are-relevant-uk-earnings#
"A pension – either from a defined benefits, defined contribution or the State Pension – isn’t classed as relevant UK earnings."

HappyHarry

Bookworm105 said:

HappyHarry said:

Bookworm105 said:

Dazed_and_C0nfused said:

activities said:

Hello everyone, could someone advise me on my tax situation. I earn £1296 per month pre tax,  I have an annual private pension of £16.000 per annum pre tax and I will be soon getting my state pension of £880.00 pre tax. I have earnt £6.000 in renting out my house. This obviously takes my earning into the higher bracket. Can I put the rental income onto my husbands earnings as he is in full time employment and not in receipt of any other monies. thankyou

Pension contributions would help avoid that.

?
deferring the state pension would have a better outcome than paying into a pension considering the OP is already receiving a private pension in payment 

I disagree - a lot more information would be required to reach that conclusion. In most situations making personal pension contributions to avoid higher rate tax would be preferable to deferring the state pension.

OP will have 4 sources of income 
- employment £15,550 pa
- private pension £16,000 pa
- state pension £10,560 pa
total relevant earnings £42,110 from which (new)  pension contributions could be made 
- £6,000 rent which we assume is taxable profit net of property allowance, but is unearned income ineligible for pension contribution tax relief
total gross income £48,110 

HR tax threshold £50,270
OP is and will be a basic rate taxpayer.
OP's objective appears to be to avoid any income in the HR bracket. The amount of money exposed to 40% will be tiny and the extra 20% tax relief by potentially paying into a new pension will be negligible and probably offset by commission payable to an IFA for setting up the new pension. Deferring state pension is a valid option.

Indeed, but by deferring their state pension the OP would be reducing their gross income now in the hope that they survive long enough to see the benefit of a higher state pension paid out over many years. 

i.e. If the OP defers their state pension of £10,560 for one year, the they could expect an increase of 5.2% in their payments when they restart their state pension in 12 months' time. It will take many years before the increase of 5.2% in payments means that their total income from their state pension has broken even and caught up the missed £10,560.

Alternatively, if the OP put £10,560 in an inexpensive personal pension (maybe not using an adviser!) then they could get some growth on this investment over the years, have access to these funds if required and in the event of their early death, these funds could go to their beneficiaries - should there be any.



 

Bookworm105

ok so "we" have confirmed relevant earnings for pension purposes is a relatively small amount and only valid for as long as OP is in employment.

I am not trying to argue which is "best", I am trying to remind people that the thread question centres on avoiding higher rate tax, yet the amount exposed to that is very small and the marginal saving from doing so should not be a driving factor behind choosing the method used.

We have no idea how much longer OP intends to carry on working, so starting a new pension on the above basis is more about an investment decision than tax advice.
Yes starting a new pension pot would give potential of taking tax free lump sum in due course, and that may eclipse deferring the state pension, but that is not about tax, it is about comparing investment options.