This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Pension Tax Relief when non-relevant income exists.

Diddion
Posts:1
Joined:Thu Jan 05, 2017 3:31 am
Pension Tax Relief when non-relevant income exists.

Postby Diddion » Thu Jan 05, 2017 4:21 am

Hi.

How is tax relief calculated for a higher rate taxpayer with a combination of both earned income and unearned income in the form of pensions and rent? In this scenario, is the earned income regarded as the bottom slice, against which the nil rate band and basic rate bands apply, with the other income lying above this for taxation purposes?

For example, Mr X has unearned income of £20k derived from rent and pensions, and earned income of £63,000 - £20k above the top of the basic rate band. He now pays £63,000 gross (£50,400 net) into a pension plan, using carry forward. Could someone explain how the tax is calculated, and whether it makes any difference whether the earned income is regarded as the bottom slice or not? My hope would be that of the total income of £83,000, £40,000 of it would be regarded as offsettable against higher rate tax for the pension contribution, but I suspect this not to be the case.

Or have I gone completely off the rails, somewhere? Thanks!

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Pension Tax Relief when non-relevant income exists.

Postby Lambs » Thu Jan 05, 2017 4:28 am

D, please see

http://taxationweb.azurewebsites.net/Pe ... debug=true

But please make sure to access in Chrome, Firefox or Safari.

The data validation in the model to restrict pension contributions only to relevant earnings is not yet installed, I think, but you seem to be aware of that restriction so you should be fine in that regard.

This should address your query. Please let us know if anything does not make sense.

Kind regards,

Lambs


Return to “Savings & Investments, Pensions & Retirement”