Life's swerve ball - need to plan differently!

If you are paying your pension through your employer the 40% tax relief happens automatically by dint of you not paying 40% tax on that portion of your salary that goes into your pension directly. There are many calculators online which will tell you how much tax you should pay taking into account your income and pension payments. Compare that with your P60.

Rodders2409 wrote: »

the only other aspect to consider are dead periods which we've never had over many years renting. And because there's no mortgage on the property I'm not going to worry about losing the place, only a period without income which wouldn't be the end of the world for a short time because I have other incomes available and I can always trim expenditure for a while.

You are ignoring what you could do otherwise with the capital - a void is not just a drop in income, it is the opportunity cost of the return you could get on that capital in either another asset class or on a more diversified res property portfolio.

But then property is religion in the UK. It always goes up. You purchased this house in 1994, at an excellent time to purchase property, so of course it always goes up in your experience.

I was stupid enough to buy a house early in 1989. In the same way as Mark Twain said of carrying a cat by the tail I learned a great truth about housing in selling a house for 50% of the purchase price in real terms 10 years, after seeing both neighbours repossessed. Thankfully I could only stretch myself to a crappy 2 up 2 down rather than a semi, so at least I could save my way out of that youthful foolishness. Housing is a cyclical market, where the cycles are long compared to the business cycle, and I had been unlucky enough to be a twenty-something at the wrong time , compounded with being stupid enough to believe the stories of previous generations who hadn't lost on houses because inflation nuked the real value of their mortgages.

But that'll never happen again, of course. Because it's all different now. And thankfully all the newspaper headlines about 3 million people in negative equity are from before 1994, and the WWW only started in 1994, so the records aren't publicly accessible.

FWIW one of the opportunity costs for you is putting the money into your pension, even if you keep in in cash, not having the 40% tax stolen from you means every £60 net you do without and shift to your pension is worth £100 in the pension or worth £80 if you area 20% taxpayer as a pensioner, a 33% ROI on riskless cash. There's a strong case for you to take out a mortgage on your primary residence so you can pump money into your pension to bring your net income down to the BRT threshold.

But of course, forget the 33%. Safe as houses, everyone needs somewhere to live, all the other tropes. Just because you can touch an asset class and understand the job it does still doesn't mean it can't burn you.

...ignoring all the drama about what could go wrong with your rental property, there is the certainty that as one gets older there is a need to simplify finances and reduce both risk and workload. At some point it will be sensible to sell the rental and convert its value to cash. Doing so now allows that to be done with the pension payment tax advantage. But only you know whether now is the best time for you to take this step.

Have you told HMRC about your pension contributions at 40%? With rental income do you fill out self assessment?

Those are two ways to make sure you are getting your 40% TR